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If you are new to purchasing life insurance, car insurance, or business insurance, you may be at a loss between all of the different places where you can buy. It is understandable you want to have solid information, the FBI has found that the total cost of insurance fraud is $40 billion per year. Safety is a concern for many people when buying the best workers comp, general liability, and other types of vital business insurance for this reason.
Legitimate insurance sellers make a living providing important policies to their customers consisting of small business owners, contractors, home-based businesses, and part-time hustlers. Know who to approach and purchasing $1 million life insurance, business insurance or home insurance becomes easier and safer.
The two main types of insurance sellers you will encounter are agents and brokers. Both may sell car insurance, life insurance, business insurance, and other types of policies. But note that they vastly differ This article will look at the common concerns people have about their differences, including:
Difference between an insurance agent and broker
Insurance broker vs agent salary
Who to approach for safer and faster coverage
How to become an insurance broker or insurance agent
What is an insurance broker vs agent? The difference between insurance brokers and insurance agents boils down to their specific roles. Insurance agents represent the insurance company and sell policies to customers. Brokers differ from insurance agents in that they represent customers and help them shop for multiple policies. Each type of insurance seller offers different advantages to the consumer. These advantages are listed below:
|Insurance Agent||Insurance Broker|
|More Knowledgeable about the products they sell||Works for the customers and is in their corner|
|Can enroll the customer directly in coverage||Makes it easy to compare multiple companies with recommendations|
|Free to customers||Provide cost-effective and fair policy recommendations|
The role of an insurance broker is to represent a buyer in the marketplace. They connect customers with insurance companies that offer policies by recommending those policies based on their client's needs.
When looking at an insurance agent versus broker, it is important to think of an insurance broker as not a direct writer of insurance. This makes them unbiased in terms of insurance companies that they recommend since they answer to you and not the insurance company.
Brokers differ from insurance agents in that their strengths rely on the value that they are giving to the customer. Customers might have to pay for this detailed customer service through a brokerage fee. If you aren’t being charged a broker fee, you will want to be on guard. NPR released a report that some insurers will hand out cash and gifts to sway brokers who sell insurance plans.
There’s an old saying that says, “You get what you pay for.” This piece of wisdom should be applied to insurance brokers as well. You will want to put your insurance needs in the hands of someone who is incentivized to have your interests in mind.
There are a few disadvantages to using an insurance broker. These include:
Insurance brokers are less knowledgeable about an insurance policy’s specifics since they look at so many different policies
You have to pay a brokerage fee for their service
They may lack specific details about discounts and offers from various companies
May have a lack of understanding about policy exceptions
The most common question new insurance buyers ask is, what is the difference between insurance agent and broker? Put simply, agents represent companies, and brokers represent customers.
This difference leads to a significant divergence in the things that both are good at. Brokers are great at getting the customer the best buying information between different insurance companies. Agents are great at getting customers the best buying information for the insurance company they represent.
In some industries, another type of agent may be able to help you with insurance. These are known as independent agents. These agents still work for insurance companies but are not employees in the traditional sense.
Independent agents must acquire the rights from different companies to sell insurance and can sell insurance from different companies, much like a broker does. However, unlike a broker, an independent insurance agent still represents the company and not the customer.
When looking for life insurance, you will want to consider the differences between brokers and agents. Below are the types of life insurance sellers:
|Life Insurance Captive Agent||Life Insurance Independent Agent||Life Insurance Broker|
|Represent the insurance seller, selling policies from one insurance company||Sells policies from multiple companies but is restricted to those with agreements. Represent the sellers||Sells policies from multiple companies, represents the buyer|
The typical differences between brokers and agents apply to the car insurance industry. However, an added benefit of agents in the car insurance industry is the result of the vast majority of drivers having comprehensive and collision coverage, according to Forbes. This makes the policy choices much simpler to navigate for new buyers.
This simplicity eliminates some of the time-saving that insurance brokers do to find your specific policies. You may have a quicker time using an insurance agent in the car insurance agency than an insurance broker.
While insurance producer and agent are two different terms, they describe the same thing. In insurance licensing, the term insurance producer is the official term. However, an insurance agent is a preferred term in the consumer sector.
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The average salary does differ between an insurance broker and an agent. This number can vary depending on the types of commission and fees that they can collect.
Insurance brokers had a national average salary of $86,000 per year in 2023. Insurance agents during this same period made an average of $55,000 per year. The reason for this discrepancy is the fees that insurance brokers charge to elevate their salary. Insurance brokers also get a commission from the company they sell insurance for every sale. Insurance agents must rely on the pay and incentives from the insurance company itself. Below is a table that breaks down the average salaries of each by state:
|State||Broker Yearly Income||Agent Yearly Income|
Insurance brokers and insurance agents rank pretty evenly in terms of safety. When thinking about safety, the best thing to do is rely on a trusted brand name rather than whether you use an agent or broker. A few safety tips for buying insurance include:
Do your own research–Having a good knowledge base will help you spot scam insurers.
Ask questions and verify answers–Don’t be afraid to ask questions during your insurance buying process. Check to see if who you are buying from knows the answers to basic insurance questions. Scammers typically have a low base of knowledge about the topic beyond their script.
Verify the company–Look for the company on accreditation sites like AM Best or Better Business Bureau to ensure they are scored. These companies are more trustworthy.
Insurance brokers can get you covered faster because they offer you a range of personalized options instantly. On the other hand, insurance agents need to talk with you and sell you their policies.
Brokers are generally faster for getting you started on the coverage process, though this is not always true. For example, if you already know the type of insurance you need, an insurance agent might be able to save you more time since you don’t need to do as much comparison shopping.
While insurance agents are the ones who actually handle your claim, insurance brokers can help expedite the process for you. Insurance brokers are motivated to help you and can help assist your claims faster by helping with the claim filing process and representing you to the insurance company.
Insurance brokers have expertise in dealing with insurance agents to the benefit of their customers. They can help to navigate a complicated claims process so that it’s easier and less stressful.
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Becoming an insurance broker is a simple process that takes around 20 classroom hours to pass the license exam. The steps to becoming an insurance broker include the following:
Meet the basic requirements–Insurance brokers must be 18 years old, be free of fraud and felony charges, and not owe any back taxes. You must also pass a background check
Acquire a degree–College degrees are not strictly required for being an insurance broker, but they help you get your foot in the door
Attend training–Getting an internship will allow you to get on-the-job experience and make connections in the industry so you can get job offers
Satisfy licensing requirements–Prospective insurance brokers must attend specialized courses and study for a licensing exam that covers insurance topics. Once the exam is passed, they can obtain a license
Get a broker bond–Insurance brokers are required to get a broker bond to hold brokers accountable for their actions. It is a necessary measure to act against potential insurance fraud
Prepare to continue your education–To maintain a license, insurance brokers must take additional education courses. If you fail to show proof of further education, you may lose your license
Becoming an insurance agent takes around three to six weeks, from taking courses to becoming a licensed insurance agent.
Meet requirements–Insurance agents must be 18 years old and not have a criminal history. You must have a minimum of a high school degree and be able to pass a background check
Decide between independent and captive agent–An independent agent requires less training and is more flexible, while a captive agent is more knowledgeable and has greater support from their company. A captive agent also typically has to sign a non-compete agreement
Pick your specialty–Agents choose their careers, also known as “lines of authority,” based on which type of insurance they want to sell
Complete the licensure requirements–You will need to complete 20 or more hours of general education classes as well as additional classes on ethics and insurance codes before you can take the exam
Complete the exam–Every agent is required to pass a licensing exam and pay the associated fees before they are officially allowed to practice as an insurance agent
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