Just like millions of people around the world, there is a huge possibility that you purchased your insurance policy through an insurance agent or a broker. This is because the work and function of both insurance agents and brokers are very similar but not that identical especially in their performances.
In this article, let us discuss the difference between an insurance agent and an insurance broker to further provide you an explanation on how agents and brokers get their income from their premiums that you pay to your insurers, where it is noted as well that the following discussion also applies to the agents and brokers who are also in the other fields like real estate property, and casualty insurances.
This article will not just discuss the insurance agent vs broker but will give you a clearer insight into these two professionals’ tasks and how do they do their job.
When it comes to similarity, there are intermediaries between agents and brokers where you, the insurance buyer will be served. Each of them has legal duties to practice helping you obtain the correct and appropriate insurance coverage at the most reasonable price. Each one of them has obtained a license to market the type of insurance that they are market in the industry. An agent or a broker must also strictly follow the regulations’ technicalities which are also enforced by the state’s insurance department.
When it comes to the difference between a broker and an agent have something to do with whom they are representing with. An agent is the one who is representing one or more insurance companies as their job is to mainly act as the extension or branch of the insurance company while the broker, on the other hand, represents the insurance buyer, or us.
Insurance agents could be both captive and independent as they represent only a single insurance company while they can also represent an all-state or multiple insurance companies at the same time. To sell their insurance products in behalf of a certain insurance company, the insurance agent must set a scheduled appointment with the insurer or the insurance buyer to come up with a contractual agreement which outlines all the specific products the insurance company offers.
This is also to specify the commissions that the insurer will give them for each product they sell. The contract is the description of the agency’s binding authority, as well as an initiation to the policy that the insurer represents.
Brokers, meanwhile, are tasked neither appointed by the insurers, instead, they are the ones who solicit insurance quotes, or policies from insurers by submitting a complete application on behalf of the insurers. Unlike insurance agents, brokers do not follow certain authority to bind the coverage, instead, they initiate a policy, to obtain a binder from the insurance buyer or insurer, by providing them with a legal binder document as a form of temporary insurance policy that the insurer must follow or agree with. This usually applies temporarily ranging from a month or two. A binder will be considered void unless it has been signed by any representative of the insurance buyer. This will be replaced after the deadline with a formal insurance policy. Brokers can sell insurance policy in bulk or individually.