What does a life insurance agent do?
Life insurance agents represent insurance companies to sell policies that meet your needs. In general, there are two types of agents — captive and independent. Captive agents typically work with one insurer and sell products offered by that company. A captive agent may be able to offer a policy from another insurance company only if the main insurance company doesn't sell that type of coverage.
Independent agents can sell policies from multiple companies, but only those with which they have an agreement to sell.
What does a life insurance broker do?
Similar to independent agents, brokers can sell policies from a variety of insurance companies they partner with. Insurance brokers typically represent the buyers, not the insurance companies. Some brokerage firms let you compare quotes from various companies and buy coverage online. Brokers can also work more personally with clients to find the best coverage options.
Life insurance brokers vs. agents
Below are a few key differences between these two types of professionals.
Brokers
Policy options: Can shop around for policies from multiple insurers.
Fiduciary duty: Must act in the best interests of you, the client.
Fees: May charge a consultation fee.
Agents
Policy options: May work with a single insurer or several.
Fiduciary duty: Must act in the best interests of the company they represent, then the client.
Fees: Generally don't charge consultation fees.
How life insurance agents and brokers are paid
Life insurance agents or brokers typically earn a base salary in addition to a commission, while others work solely on commission.
A life insurance agent's or broker’s commission depends on a few factors, such as the type of policy they sell and the payment structure of the insurer or insurers they work with. Commissions can be up to 40% to 115% of the premiums the policyholder paid within the first year of the policy. The commission usually drops to a lower percentage (1% to 10%) in subsequent years and eventually tapers off. Permanent life insurance policies tend to have the highest and longest commission structures.
Agents don’t usually charge additional consultation fees, so you won’t pay anything extra for a policy that you buy through an agent. Brokers sometimes charge a consultation or advisor fee to help you find the best life insurance policy.
Life insurance broker vs. agent: Which is best for you?
Life insurance agents and brokers offer similar services and usually need a state license to sell insurance. While regulations vary by state, agents and brokers typically have a fiduciary responsibility, which means they are in a position of financial trust. But there are key differences: an agent’s fiduciary duty is to the insurer, then the client, while a broker’s duty is to the client. Both agents and brokers are required to provide accurate and timely information about the policies they sell.
When to use a life insurance agent
If you know the exact policy or insurer you want, you may prefer dealing with one company. If so, you can shop directly on the insurer’s website or through a captive agent who sells that company's products.
A life insurance agent may be a good fit if you:
- Know the kind of policy you want to purchase from a company.
- Are healthy and want a simple life insurance shopping process.
- Don’t want to pay extra fees since agents typically earn commissions from life insurance sales.
A life insurance broker or independent agent is a solid choice if you want to see quotes and offerings from a variety of companies. For the widest range of options, choose a broker who works with a large number of companies. A good broker will know the life insurance underwriting guidelines at different insurers and steer you to the one most likely to offer the best-priced coverage. It’s also worth enlisting the help of a life insurance broker if you have a major health condition, a dangerous job or something else that makes you a high-risk life insurance applicant.
A life insurance broker may be a good fit if you:
- Would prefer someone to help you shop for life insurance.
- Have a more complex health or financial situation and need additional insight.
- Don’t mind paying a state-regulated consultation fee for personalized recommendations.
Online vs. traditional life insurance brokers and agents
Depending on the kind of life insurance you’re interested in, you may be able to choose between an online purchase and a more traditional one (such as over the phone or even face-to-face). Here’s what to consider.
a: Online agents and brokers
Shopping online through a broker or agent is a good idea if you require minimal help because you know how much life insurance you need and the type of policy you want.
If all you need is term life insurance, an online agent or broker might fit the bill. Term life lasts a set period of time, such as 10 years or 20 years, and is typically the most affordable life insurance. These policies are sufficient for the majority of people, and most insurers offer them.
Some companies sell same-day term life policies online. This type of instant life insurance coverage offers a quick application process that doesn't require a medical exam for many applicants. While it’s convenient, coverage can be more expensive as the insurer doesn’t have a complete picture of your health and lifestyle.
b: Traditional agents and brokers
A traditional agent or broker offers a more personalized experience, typically doing business face-to-face or over the phone. Choose this type of service if you need more support than an online platform can provide, or if you need permanent coverage, such as whole life insurance. A permanent policy can cover you for your entire life and includes cash value that grows tax-deferred.
Permanent life insurance is more expensive and complex than term life, so you may prefer to talk through your options with an agent or broker before making a decision.
How to choose an agent or broker
It’s important to find a life insurance agent or broker who understands your goals. Once you decide between an online or traditional agent or broker, start by asking for referrals from friends, family or community members.
You can also find trusted agents and brokers online, including companies that specialize in coverage for specific groups.
How to choose an agent or broker
It’s important to find a life insurance agent or broker who understands your goals. Once you decide between an online or traditional agent or broker, start by asking for referrals from friends, family or community members.
You can also find trusted agents and brokers online, including companies that specialize in coverage for specific groups.
No comments:
Post a Comment