Should I work with an insurance agent or a broker?

First, lets start off by talking briefly about the differences between an insurance agent and an insurance broker. The key difference is the number of insurance companies the salesperson represents. An insurance agent will typically only work with one company (a captive agent) or a few (an independent agent), whereas a broker usually works with many more. To simplify the concept, you could say that an insurance agent works for the insurance company or companies while the insurance broker works for you.

Now, while that may make it seem like working with an insurance broker is the obvious choice, the reality is much more nuanced. Both brokers and agents will analyze your insurance needs and try to recommend an insurance product that is right for you. However, their product knowledge and compensation structures can make a difference.

An insurance agent works for, at most, only a few insurance companies, this means that they will have more in-depth knowledge of the products they are recommending to you. They will also have a more direct line to the insurance company they work for (for more on the benefits, see Insurance Agents: What’s the Point?). The downside to this is that they are limited to a few products and they might not be the best option for you. There might be cheaper policies or policies that cover more risks out there that the agent cannot sell you.

This is where the broker comes in. Brokers typically represent more insurance companies than an agent, meaning they have more options when it comes to finding the product that is the best fit for you. Because of this, they can shop around and get you the best price; they might also have more lines of products, so you can get your life, auto, home, and commercial policy from the same person. This allows you to have a single point of contact for all your insurance needs. However, there are downsides. Depending on your local laws, some insurance companies may offer higher commissions for their products. This means you risk your broker pushing a product that is not necessarily right for you but will offer them a higher commission (see What Is an Insurance Broker? to learn more).

So, you should work with a broker if having a single point of contact appeals to you or if you have complex insurance needs that require working with a number of insurance companies (more than a single agent can sell you). But most importantly, you should work with someone knowledgeable that you can trust.