When shopping for the right life insurance policy, speaking with a knowledgeable industry expert and considering their recommendations can be very helpful when choosing between life insurance carriers and policies. Within the life insurance industry, you’ll often hear these experts referred to as brokers and agents.
Though many people use the two terms interchangeably, there’s quite a big difference between an insurance agent vs broker. While both can help you purchase a good life insurance policy, it’s important to understand the differences in how life insurance brokers and agents operate.
Insurance Broker vs Agent: What’s the difference?
Both insurance agents and brokers are licensed professionals who act as intermediaries for life insurance companies. Their role is to help facilitate the connection between a customer and the insurance provider. However, one is affiliated with one or more providers, while the other is independent of any particular insurance carrier.
What is a life insurance agent?
A life insurance agent is someone who represents one or more insurance companies and makes sales on behalf of these providers. This means that a life insurance agent can only offer you the products their company sells. Insurance agents fall into one of two categories:
- Captive agents – Professionals who represent only one specific insurance company.
- Independent insurance agents – Professionals who represent more than one insurance provider.
In both circumstances, agents make money by selling these policies for a commission. Agents may be employed by an insurance agency or work as independent contractors for an insurance carrier.
What is a life insurance broker?
A life insurance broker is a professional who represents the customer, independent of any particular life insurance provider. Even though they are authorized to offer various life insurance carriers, products, and services, they are not employed by the insurance companies directly. This gives life insurance brokers the freedom to recommend any product or service they feel is in the customer’s best interest without any strings attached.
Independent life insurance brokers cannot close on life insurance policies by themselves. To finalize the contract, they must work with an insurance agent or the insurance company in question. In this arrangement, brokers make money through broker fees – a percentage of the insurance agent’s commission on the policy being sold. In short, life insurance brokers deal with life insurance companies so you don’t have to.
Why should you consider working with an insurance broker?
Both agents and brokers serve a valuable role in the life insurance marketplace. If you already know what kind of policy you’d like and where you’d like to buy it from, then working with an agent is adequate.
However, if you’re not set on a specific policy, you might want to work with a life insurance broker. There are a few things to consider, including any special needs or specific policy questions you may have and if you qualify for a life insurance product with a better rate and higher death benefit.
In these circumstances, it’s better to work with an insurance broker. Here are four reasons why.
Better Selection
Because an insurance broker works with a much larger pool of insurance providers, it is easier for them to find a policy that is affordable and tailored to your needs. On the other hand, insurance agents are limited to only the products their insurance company authorizes them to sell.
More Transparency
Most insurance agents are financially incentivized to steer clients toward specific products and services. When a policyholder purchases insurance from an agent, they really never know how much more expensive the policy may be due to the agent’s commission.
Meanwhile, independent brokers can be much more transparent about their motivation. They must fully disclose the commission rates, letting you know how it affects your insurance premiums.
Tailored Recommendations
Some brokers work with the same clients on multiple financial services, such as investing or wealth management. This allows them to take a more holistic approach, considering the client’s entire situation and determining which products would make the best fit.
By contrast, an agent will do the best they can to recommend the products at their disposal. Additionally, purchasing your policy from them may be the first and last time you speak to them and the one-and-done approach makes it difficult for agents to truly understand your needs.
Experience with a Wider Audience
Because agents are limited to only the products offered by the insurance company they represent, this can also limit the type of customers they can sell policies to. Unfortunately, if you don’t fit into this mold, they might not be able to provide you with adequate support.
Alternatively, independent life insurance brokers work with customers of all ages, health, income, and circumstance. This increases the likelihood they’ve helped someone with similar questions or situations as you and have experience finding the perfect policy to fit varying needs.
Where to Find a Licensed Life Insurance Broker
If working with a life insurance broker sounds like the path you’d like to take, one of Principled Life’s independent brokers can help. Principled Life is a licensed life insurance brokerage built specifically to be your guide through the life insurance marketplace. Together, we’ll find insurance that fits your life at a cost you can afford. Feel free to request a quote through our website, or if you prefer, you can speak to one of our experienced insurance brokers today.
