Shortcut Navigation:

Finding and Working with an Insurance Agent or Broker

These days, you can buy any type of insurance without going through a professional. But is that the best approach? If you're a savvy consumer with time on your hands, buying insurance on your own may not be a bad idea. However, if you're like most people, you'll benefit from the services of a qualified professional.

Why work with a professional?

Insurance has grown increasingly complex over the years. There are literally thousands of insurance companies and policies to choose from, and new products are entering the market all the time. Plus, policies are often filled with disclaimers and insurance jargon that can frighten the average consumer. A variety of specialized types of coverage, discounts, and surcharges may further muddy the waters. How do you make sense of it all?

This is where a good insurance agent or broker can come in very handy. Among other things, one of these professionals can help you:

  • Determine your insurance needs in a particular area (e.g., the types and amounts of auto insurance coverage you need)
  • Find insurance companies and policies in your price range that can meet those needs
  • Choose the particular policy that best meets your needs at the lowest possible price
  • Add riders or endorsements to tailor the policy to your unique circumstances
  • Resolve any questions or complaints you might have, both before and after the sale
  • File claims and receive payment in a timely, hassle-free manner
  • Stay abreast of your changing insurance needs, and make any necessary changes to your coverage
  • Switch companies or policies if you're not happy

Some of this can be done on your own using the Internet and other resources, but there's no substitute for a good client-advisor relationship. Choose the right person, and you'll be rewarded many times over. Hopefully, as the relationship builds, you'll gain increasing confidence that the person acts in your best interest and knows what he or she is doing. That peace of mind may be well worth any commission or fee you have to pay. Finally, using an agent or broker can simplify your life if you're able to buy more than one type of insurance from that same person (e.g., less record keeping).

Agent or broker--what's the difference?

An insurance agent may be employed directly by an insurance company or may be an independent contractor. If independent, an agent typically contracts with a limited number of insurance companies and sells policies issued only by those companies. Some agents (known as exclusive agents) may even contract with only one company. The main disadvantage of using an agent is that you'll probably have fewer options to choose from. The upside is that a good agent will be totally familiar with the companies and policies he or she deals with. Plus, some companies may employ only agents to sell their products. The two major types of agents are property/casualty agents and life/health agents.

An insurance broker is completely independent. Instead of being tied to one or a handful of insurance companies, a broker can work with many different companies and sell their products. This means that a broker can offer you a much wider range of choices than an agent, and a good one will thoroughly shop the market for you. Plus, since a broker has no company allegiance, he or she represents you (the client) directly. However, a broker may lack the detailed knowledge of companies and policies that many agents have. A broker typically specializes in one or more types of insurance and may sometimes work with other professionals to arrange appropriate coverage for you.

In general, agents earn less than brokers in commissions and/or fees. That's mainly because agents often receive perks from the companies they work for, such as paid expenses and company fringe benefits. Both agents and brokers may receive bonuses and other incentives if they reach a certain production level with a company.

How do you find the right person for the job?

It's very important to find an agent or broker who will serve you well for a long time. The best way to do that is to take your time and be selective. Start by talking to friends, family members, co-workers, and other people you trust. How satisfied have they been with their insurance professionals? You can also ask other professional advisors (e.g., your financial planner or attorney) to recommend someone. If word-of-mouth references get you nowhere, look in your phone book or on-line for insurance professionals in your area. You can also contact your state's insurance department for information.

These are only preliminary steps, however. The real work lies in screening your potential candidates. Here are some tips to help you find the right agent or broker:

  • Find out about the person's credentials (e.g., CLU for life insurance, CPCU for property/casualty insurance, RHU for health insurance) to be sure he or she is well qualified for the job.
  • Make sure the person has at least several years' experience with the type(s) of insurance you need. Typically, to receive a professional designation, a person must have three or more years in the business.
  • Know how (and how much) the person gets paid. There are many different types of payment structures for insurance professionals, including commission only, fee-plus-commission, and fee only.
  • Find a person you like, feel comfortable working with, and who listens to you.
  • Make sure the person's hours fit your schedule and lifestyle.
  • Ask to speak with some of the person's existing clients to get a sense of the customer service you can expect in the future.

Think of your initial meeting with an agent/broker as a job interview. Don't be afraid to ask lots of questions--the answers you get will give you further insight into the person's knowledge, integrity, and concern for your needs. The impressions you come away with are more important than how good the person looks on paper. Finally, after you choose an agent or broker, periodically assess the person's performance. You can always switch to someone else if you're not satisfied.