Insurance broker vs. independent agent
You can buy insurance from the carrier directly or from a captive agent, independent agent, or broker. Captive agents represent one carrier only. For example, your local State Farm agent only sells State Farm policies. Independent agents represent multiple carriers, so they have a broader range of options to research and present.
Brokers are similar to independent agents, with one primary distinction. Independent agents can initiate or bind coverage, while brokers cannot. Brokers can assist their clients with the application process, but only the insurance company activates the coverage. As a result, working with a broker may delay the time it takes for coverage to take effect after selecting a policy.
Pros and cons of working with a broker
The advantages of working with an insurance broker include:
- Experience: Brokers often specialize in one segment of insurance, such as business insurance, life insurance, health insurance, or property insurance. That experience can help them identify your needs and find the best solutions for you.
- Range of choice: Since brokers represent multiple carriers, they can do a broad sweep to find appropriate coverage at a competitive price.
- Policy support: Brokers can complete applications for you and answer coverage questions regarding policy deductibles and copayments. They can additionally be your first point of contact for claims. Note that brokers can be independent or work within larger organizations. The size of the broker's team can affect the support level you receive.
The disadvantages of working with a broker include:
- Potential for fees: In some states, brokers can charge fees on top of the commissions they earn from carriers.
- Inconsistent service levels: Some brokers are better than others. Interviewing candidates and checking references are important steps to finding a broker who is diligent and transparent.
