What are the pros and cons of buying insurance directly from an insurance company? The popular myth is that it's cheaper to buy directly from an insurance company. That seems to make sense: if you cut out the middleman, that cuts out a cost, therefore you're going to get a cheaper product. That's not always the case unfortunately, because if you don't know exactly what kind of coverage you need, you actually might be buying more than you need and paying more for it, so whatever savings you may have achieved by cutting out the insurance agent may have been lost by the fact that you're buying more insurance than you actually require. Another situation is that if you buy directly from the insurance company, you won't have that intermediary there on your behalf to help you through the process if you do have a claim. Thirdly, and most importantly I think, is if you buy directly from the insurance company, you're only hearing that company's point of view. If you deal with an independent insurance agent, these individuals are licensed to represent a variety of insurance companies and they can put you with the best company at the best price. If you deal directly with a company, you're going to be limited to getting quote, and whatever coverages are offered from that specific insurance company. They will always talk a good game and tell you, "We're always the best, we're the cheapest" etc., but you'll never really know that for sure unless you shop around. I personally think the best way to do that is through an independent insurance agent.What's the difference between a "captive" and an "independent" insurance agent?

Well it's pretty simple. A "captive" is exactly what it sounds like. They are a captive of the insurance company they work for; they represent solely that one company. So, and it's very easy to pick out these types of agents. If you're walking down your main street wherever you happen to live, if you see the name of the insurance company on the storefront, whether it's Statefarm, Allstate, Prudential, MetLife you will see the, that you know is a captive agent, that is a representative of that company. If, on the other hand, you're walking down the street and you see the John Smith Insurance Agency you know that this individual is an independent agent, he's free to do business with whatever carriers he signs on with, and by definition they're going to have a stable of carriers that can meet a number of your needs, as opposed to just offering you, you know, the offerings of one company, and that's the big difference dealing with an independent agent. What's the difference between an "insurance agent" and an "insurance broker"?

An insurance agent is someone who is licensed by a carrier to represent them. So technically, they are the insurance company's representative in the market. An "independent agent" can be licensed by a variety of companies while a "captive agent" is usually only licensed by one company. An insurance broker, on the other hand, is legally the representative of the client and is free to place business wherever they can find a market. In reality, however, when you're dealing with personal insurance issues, like auto and homeowner's coverage, ninety-nine percent of the time you're dealing with agents. It's usually the bigger commercial companies that are dealing with the major national insurance brokerages in placing coverage not only here in the United States but overseas. So, for the most part, people are dealing with agents who are legally representatives of the companies that appointed them. What are the advantages and disadvantages of buying insurance through an agent?

The advantage is of dealing with an agent is the fact that you'll have somebody that can be an expert advisor to you and that can have access, if they're an independent agent, to a multitude of markets, so they'll make sure that you get the right coverage at the best price possible. The disadvantages of working with an agent might be that there's an extra cost involved because you have an intermediary. That's at least the mythology that's out there--that if you cut out the middleman you save money. That's not always the case, because you may save money on premium but you may not be getting the right coverage, which could harm you down the road when it comes time to make a claim. My advice to people is always try to deal with an agent when buying insurance.What should I consider when choosing an insurance broker or agent?

I think the best advice I can give people when choosing an insurance agent is to deal with a referral if at all possible. Ask your friends: Who is their insurance agent or broker? Are they happy with them? If they are happy with them, what do they like about them? Make your friends articulate the advantages of dealing with this insurance agent because at least in that case, you get some sense that people that you trust have had a good experience with this person in getting price, coverage, and even a claim handled properly, which is really when the money is on the line. My best advice is to do that. Otherwise, just sit down with the insurance agent, talk to them in as much depth as possible, make sure you're comfortable, that you understand their explanations, that they're being patient with you, and giving you full disclosure about what's covered in the policy. Shop around. See more than one insurance agent before you make your decision. You might be comfortable with insurance agent A but when you get to B and C, you find out you and C really hit it off and you're prepared to place your business there.What kind of support can I expect from my insurance broker or agent?

First and foremost, you want your agent or broker to get you the best coverage at the best price. You want them to listen to you as to what your liabilities are, how much property you own, what types of exposures you're worried about, and let them get you an insurance policy that will cover you when the chips are down and you have a loss. And, when you do have a loss, you'd like to have a broker or agent who will help you through that process, because that can be a traumatic time especially if there's any question about whether the loss might or might not be covered. So you'd like to have an agent and broker who's an advocate for you with the insurance company, make sure that you're treated fairly, because the agent and broker's reputation depends to a large extent on how good the experience is with the carrier they place you with. So they have a lot of incentive to try to make sure that you're well taken care of. So you want them to be your advocate.

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