Friday, November 30, 2012

Broker or Agent?

So aside from titles, what is the difference between and Insurance Broker and an Insurance Agent?

An Insurance Agent generally can only write business for one carrier or for a limited number of carriers due to contract restrictions.

A Insurance Broker can write for any carrier that they are appointed for or for Managing General Agents.

The question to ask is: Can that Agent / Broker write all of the policies you need?

An Insurance Agent can usually write several types of insurance with the same carrier. So if you needed landlords, homeowners, auto, renters and a commercial liability policy they should be able to provide you quotes with the same carrier.

But say you need homeowners in a high fire area, landlords, flood, and vacant property, a Broker might be able to provide better options. I've ran across situations where the carrier the client had been with would not write high fire, flood or vacant property. Or after providing coverage for years, the carrier canceled the client simply as a business decision.

Another difference can be in how they get paid. Some Brokers charge a broker fee over and above the amount of the policy. For example, Ted and Mary buy a homeowners policy from Benny Broker. The cost is $860 for the year. When Ted and Mary look at the quote they see a line that says broker fee: $150.00. This means that the policy from the carrier costs $710.00 for the year. The $150.00 all goes to Benny, plus Benny gets his commission from the carrier based on the $710.00 premium. Generally if a broker fee is charged it must be disclosed to the client  in the quotation and / or a separate disclosure. The rules on this vary from state to state.

An Agent could be paid on commission or on salary plus commissions or sometimes on salary plus a bonus per policy. Their agency may or may not charge a broker fee.  It all depends on the professionals contract with the Broker or the carrier.

In short, it pays to shop around for your insurance. Compare quotes and coverage  make sure you understand what is covered and not covered. Just because you think you can't get insurance on a property, does not mean that you can not get it insured if you are willing to pay the price. An insurance Broker can provide more options, personalized service and more pricing options than an Agent that can only write for one carrier will be able to.