In order to compare these two distinct entities, we will first define what they do. An insurance agent works directly for the insurance company. They are sometimes referred to as captive agents, as they can only offer coverages for the insurance company they work for. For example, if John Smith works for ABC Insurance Company, he can only sell ABC Insurance Products with few exceptions.
However, an Insurance Broker acts as a go-between the insurance company and the insured. So to use another example, John Smith has his own insurance brokerage, and is appointed to quote and sell for dozens of insurance companies and is not held captive to just one.
Whichever one you choose is, of course, entirely up to you. But if your insurance needs require a little more special attention and may be considered out of the ordinary, an insurance broker may be the right fit for you.
Quite often and not uncommon, an Insurance Agent seeks to keep the insurance company happy. So the interest of the insurance company is kept in mind before your own. The Insurance Agent, however well intentioned, does not have access to every "market" to meet every "exposure." Without getting too insurance nerdy on you, in plain English, the Insurance Agent may not have the right policy or coverages for your specific needs as they are somewhat limited.
An Insurance Broker has many different markets or insurance companies to choose from. For example (yes - another example!), your home may have an underground oil tank, or, it may be located within walking distance to the coastline. Your favorite furry family friend (dog, or insert any other animal you may own here) may have a bite history. Your house could have a wood burning stove or could be located more than ten miles from the nearest fire department. Do you think your current homeowners insurance policy addresses these needs?
How about your car? Has it been modified with sporty equipment? Do you take it to the race track? Would you like to use parts originally manufactured for your vehicle or cheaper aftermarket parts? How long will your auto insurance policy pay for a rental vehicle? Is your auto insurance coverage broad enough to cover these losses?
And your condo? Did you know that some condo association boards hold their tenants responsible for common shared areas such as hallways or stairwells? You may also have to pay a portion of the Condo Association's deductible if there is a loss to a shared structure (i.e. pool house, clubhouse, tennis court, etc.). Do you have the right condo insurance?
For all of you renters, danger is looming around the corner as most renters do not carry apartment insurance. Many renters believe they do not need insurance as they may not have a lot of contents in their apartment. What would happen if there were a fire in your apartment complex and your unit is deemed uninhabitable? If you had apartment insurance, in addition to your personal contents being covered, the policy would afford a loss of use coverage on the unit and you would be located to either a hotel or another apartment building depending on the policy verbiage and claims process.
Everyone needs life and health insurance. If you have debt, a family, or would just like to leave enough to cover your final resting place expenses, life insurance is a must. However, what are the benefits of term insurance as opposed to whole life insurance? Your licensed insurance broker will be able to determine how much coverage is needed by doing a simple needs analysis. It's really not as painful as it may sound. Depending on your planned retirement date, your insurance broker can also help you choose the right annuity. Your insurance broker can also configure and secure health insurance coverages for you that are more tailored to your specific needs.
There is also one last but very important point I would like to stress. These days, everyone is trying to save money and that is certainly understandable in this economy. But there is an old saying, "Don't cut off your nose to spite your face." What I mean by that is please do not be overly focused on price. While you shouldn't be spending a crazy fortune on your insurance, it is more important to compare the coverage of one policy to another. Take homeowners insurance for example. You may be able to receive another $500,000 in liability coverage for less than what you paid on that cashmere Christmas reindeer sweater. Although I love sweaters, I would prefer more liability coverage.