What Is the Difference Between an Insurance Agent Versus a Broker?

When you purchase insurance, you need to understand your coverage needs, the available policies, and the terms of each policy. However, you also need to know the distinctions between insurance brokers and agents. Both categories of professionals can help you secure the insurance coverage you need, but there can also be significant differences between their responsibilities, affiliations, and roles. Learn what defines them, the similarities they share, and the differences between them.

What Is an Insurance Agent?

An insurance agent is a professional who is licensed to represent an insurance company. Some insurance agents represent multiple companies at the same time. They serve as intermediaries between clients and insurers, but their primary responsibility is selling policies. Captive agents work exclusively for a single company and only sell their products, but independent agents can offer more options through multiple providers. Agents learn their client’s needs, find the best policy solutions that match, explain the options, and assist the purchase process. However, insurance agents usually dedicate their allegiance to the insurance companies with which they are employed or have agreements.

What Is an Insurance Broker?

Insurance brokers are also licensed professionals, but they work differently than agents. An insurance broker represents their clients instead of policy providers. They look out for the best interest of their customers, mainly in guiding them to the most suitable policies for their needs and budget. Brokers don’t have the binding authority that agents have; they can’t finalize contracts as insurance company representatives. What brokers can do is gather information about customers, compare policies, and offer the best options. Brokers and agents both earn commissions from insurers, but brokers have primary obligations to their clients instead of insurance providers.

Similarities Between Agents and Brokers

Insurance brokers and agents share several similarities. First, they are both groups of licensed professionals who must comply with regulatory requirements for their specific practice. Second, they work as intermediaries between insurance companies and policyholders. Third, they offer guidance and advice to help consumers understand their insurance needs and possibilities. Fourth, they earn fees and commissions from selling insurance policies.

Differences Between Agents and Brokers

Agents and brokers have areas of functional overlap, but there are key distinctions. First, agents are representatives of insurance companies, but brokers represent their clients. Second, agents offer policy selections from the limited companies they contract with, whereas brokers offer access to a broader range of products, given their independent work. Third, agents might have the authority to finalize policies for their insurers, but brokers can’t do this; they can only facilitate the process. Finally, brokers and agents have different objectives. An agent prioritizes the products and goals of the insurance provider they represent, but a broker emphasizes finding the best policies their clients need.

Knowledge Is Power

Knowing the differences and similarities between insurance brokers and agents empowers you to make educated choices when you need coverage. Choosing between a broker or agent should reflect your current needs and how much independence you want while exploring insurance options.