Insurance agents and brokers

Insurance agents and brokers who specialize in property and casualty insurance help small business owners obtain insurance coverage from insurers at a reasonable price (or premium). Agents and brokers are licensed in their states and must comply with all governing statutes and regulations.

Insurance agents and brokers can specialize in offering one form of small business insurance. Or they can provide many different types, including:

• General liability insurance
• Business owner’s policy
• Errors and omissions insurance
• Professional liability insurance
• Commercial property insurance
• Business interruption insurance
• Workers’ compensation insurance
• Commercial auto insurance

An insurance agent is a professional who sells an insurance company’s products to consumers for a commission. An agent helps consumers select the right insurance to buy, but represents the insurance company in the transaction.

There are two types of insurance agents:

• Captive agents typically represent only one insurer.
• Independent insurance agents typically represent more than one insurer.

Both captive and independent agents work on commission and can execute an insurance transaction from start to finish.

An insurance broker is a professional who represents consumers in their search for the best insurance policy for their needs. They work closely with their clients to research coverage, terms, conditions, and price and then recommend the insurance policy that best fits the bill.

Unlike captive and independent agents, who represent one or more insurance companies, a broker’s primary duty is to the client.

Since brokers don’t represent insurance companies, they can’t bind coverage on behalf of an insurer. They must hand over the account to an insurer or insurance agent to complete the transaction.

There are two main differences between insurance agents and brokers:

• Agents represent insurers, while brokers represent consumers.
• Agents can complete insurance sales (bind coverage), while brokers cannot.

Agents also receive appointments to represent one or more insurance companies, but brokers do not. An appointment is a contract an agent and insurer sign that outlines the products the agent can sell and for what commission.

Brokers, on the other hand, can solicit price quotes from multiple insurers. But when consumers are ready to buy, they must obtain a binder directly from an insurance agent or the insurance company.

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