What is the Difference Between an Insurance Agent and an Insurance Broker?

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Insurance Agent vs. Broker: What’s the Difference?

Insurance agents and brokers are professionals who sell insurance. They may choose to specialize in a certain area, such as property and casualty insurance (P&C), which protects businesses against lawsuits and property losses.

Both agents and brokers are licensed in the state where they operate and must comply with all governing statutes and regulations. And like any small business, insurance agents and brokers both need business insurance themselves in order to operate in many locations.

Regardless of which option you choose, agents and brokers are obligated to act in good faith in helping you find the best policy for your needs. Let’s look at the similarities and differences between the two, and how either option can help you find the best coverage in small business insurance.

An insurance agent is typically a representative of the insurance company. Agents must be licensed in the states in which they do business and licensed with the various companies they represent. Captive agents typically do the vast majority of their insurance business with one company and may be contractually prohibited from selling other companies’ products. Some agents can be licensed with multiple carriers and make products from all of those companies available to their clients.

Insurance brokers differ in that they represent the client. Brokers typically have additional tests they must pass as well as bonding requirements that may be determined by the state in which they are licensed. Most often a broker will represent many companies and offer multiple alternatives to their clients.

But How do I choose?

When contemplating an insurance purchase consider asking the person you are working with whether they are an agent or a broker, or both. Also ask them for a list of all of the companies they have done business with in recent years and what percent of their business has gone to each. There are a wide array of choices, prices, products, and financial strength of companies, which should all be taken into account during the insurance acquisition process. Generally, the more options you have, the better.