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When purchasing insurance, an insurance agent can help you find the policy that works for you at a price you can afford. An insurance agent works for one or more insurance companies—and not insurance policyholders—to help you get the policy you're looking for.
Of course, you can shop and compare insurance policies on your own, but enlisting the help of a licensed agent may save you time and money.
What Does an Insurance Agent Do?
An insurance agent represents one or multiple insurance companies and sells their policies, usually for a commission. To begin with, an insurance agent works with you to understand your budget and insurance coverage needs. Then, your agent can help you find a policy that provides the right amount of coverage at a price you can afford.
Insurance agents perform a wide array of duties to help you, such as:
- Working with you to develop a suitable coverage plan.
- Assisting you in completing the required forms to enroll in an insurance policy.
- Periodically consulting with you to ensure your coverages are up to date and continue to address your circumstances.
- Helping you file and settle insurance claims.
Insurance agents work in many industries, including life, auto and health. But regardless of the industries they represent, their most important duty remains the same—to match you up with the best policy that meets your needs at an affordable price.
Insurance Agent vs. Insurance Broker
While both insurance agents and insurance brokers serve as intermediaries between insurance buyers and insurance providers, and both must be licensed to sell insurance, there are a few primary differences between these two professionals:
- Agents represent insurance companies, while brokers represent their clients.
- Agents may be incentivized to sell policies from insurance companies they represent, while independent brokers are not beholden to any particular insurer.
- Agents can enroll you in binding coverage, but brokers cannot.
If you already have a good idea of what coverage you need, or you already have a particular carrier in mind, enlisting the help of an insurance agent may make sense. An agent representing the company can give you more details about the insurer's policies, but understand the agent may be motivated to sell policies from their company.
That doesn't necessarily mean their intentions aren't good. A good insurance agent will help you get quotes from other companies if their carrier can't insure you. But if the options an agent presents you with are limited to one company, you may be better off working with another agent.
By contrast, if you want to shop and compare multiple insurers, an insurance broker can help you evaluate competing policies from several insurance carriers. An independent broker isn't bound to one insurance company and may be able to give you unbiased advice to help you choose a policy for your needs.
|Insurance Agent vs. Insurance Broker
|Represents the insurance company.
|Represents the insurance buyer.
|Sells products and gives price quotes from select insurer(s) they work with.
|Helps customers to identify the best policy coverage and gives price quotes from multiple insurance companies.
|Salary and/or commission
|Brokers fee and/or commission
How to Find Insurance On Your Own
It's possible to find insurance on your own, but it typically requires more time and energy to research and compare policies. It's essential to shop for quotes from multiple insurers to help ensure you aren't paying too much for a policy.
Whether you're shopping for auto, home, life or another type of insurance, it's important to compare similar coverage plans and limits, so you're comparing apples to apples, not apples to oranges. Here are some steps you can follow to make sure you're getting the best rate for comparable coverage:
1. Determine What Coverage Options You Need
Figuring out how much insurance you need may depend on the type of policy you're getting. If you're financing a car, for example, your lender may require you to carry full coverage car insurance on the vehicle. For life insurance, financial advisors often recommend a policy covering 20 to 30 times your income to account for inflation and ensure your beneficiaries have enough money over the long term.
Of course, the coverage options and amounts you need are unique to your financial situation. Work with a licensed agent or broker to discuss your specific needs and review different policies that address them.
2. Review the Financial and Customer Experience Ratings of an Insurer
Getting a great deal on your insurance is the goal, but it won't mean much if your insurer isn't financially stable enough to make good on its claims. Before taking out an insurance policy, check the carrier's financial stability ratings at AM Best. This independent agency reports on the creditworthiness of over 16,000 insurance companies around the globe.
Additionally, you can learn more about an insurer's customer service record by searching the National Association of Insurance Commissioners' (NAIC) Complaint Index. Every year, the NAIC issues a complaint report for most insurance companies based on the number of complaints they receive and their size.
The average score on the index is one, so any score lower than one indicates fewer complaints on average, while scores greater than one means the insurer received more complaints than is typical.
3. Compare Several Insurance Quotes
Comparing quotes from multiple insurance providers is essential because prices for the same level of coverage can vary widely. Remember, insurance premiums are based on risk, and every insurance company has its own formula for assessing your risk of filing a claim.
While choosing a policy with the lowest premiums is tempting, finding the best value that combines the coverage you need at the best price is more important. By signing up for the most inexpensive policy, you may limit your coverage options or amounts, which could cost you more out of pocket if you ever file an insurance claim.
4. Ask About Discounts
Most insurers offer some discounts with their policies. For example, your teen driver with good grades may be eligible for a reduced premium. Additionally, many insurance providers offer bundling discounts if you purchase more than one insurance policy with the same insurer.
Talk to your insurance agent and request a list of all available discounts. You may be able to significantly reduce the amount you pay for your policy.
The Bottom Line
Making sure you're adequately insured can reduce your financial risk and make any covered loss easier to manage. Ideally, you'll find coverage that meets your needs at a price you can afford.
Remember, some states allow insurers to use a credit-based insurance score when setting premiums for their policyholders. If you live in one of those states, you could pay a lower premium if you have a good credit score. As such, you may want to check your credit report and credit score to see if you can improve your credit before applying for an insurance policy.