Why Use An Independent Agent?
There are two kinds of insurance agents, Captive Agents and Non-Captive, or Independent Insurance Agents.
There is a big difference!
Captive Agents are committed to one insurance carrier, like AllState or State Farm, and are restricted to selling that one company’s product line. They cannot shop around for other opportunities that may better suit consumer needs. To a captive agent, the parent company comes first.
On the other hand, Independent Insurance Agents are open to offering their customers multiple product lines, which may include The Hartford, Safeco, or Travelers. This broader selection offers more resources to find coverage that best suits your personal situation. To an independent agent, the customer comes first.
The insurance agent is actually your legal representative – your agent – to the insurance company. The agent is licensed by your state and carries with them the fiduciary responsibility to be your advocate. They must put your interests first over and above their own, or the insurance company. Even though the agent is paid by the insurance company, they work for you.
An independent agent can do important things for you:
- Agents have at their disposal the ability to quickly check prices and coverages with dozens – if not hundreds – of different insurance companies. Since rates vary widely an independent agent can very likely get you a better deal than you can get for yourself. They can even get you insurance from a ‘direct writer’ like you could get for yourself.
- Independent agents are a one-stop-shop for all of your insurance needs. An agent typically doesn’t sell just auto insurance. They also sell homeowners, renters, health and life insurance, business insurance etc. Use them – at no cost to yourself – to handle all of your insurance in one place.
- Insurance is a complicated subject. Its an agent’s business to understand it, and communicate it to you so you understand it as well. In almost all cases an ordinary consumer will benefit from having someone who deals with this subject for a living advise them on a 50+ page contract. If there are any hidden surprises, a licensed agent is the one equipped to know where they are. Even if you understand insurance thoroughly you can get tripped up: The industry is regulated on a state-by-state basis. Move from one state to another and you’ll find that the coverages may look the same at first glance, but on closer examination things work a bit differently (very differently, in some states).
- Coverages don’t just vary from state to state … they vary from company to company within the same state. Many companies use what are known as ‘manuscript’ policy forms (form = contract in insurance jargon). These forms don’t necessarily use industry-standard wording and may contain altered provisions that materially affect you in some way… some unknown way if you don’t have an expert advisor who is already familiar with a particular policy’s quirks.
The above is the good news with regard to what an agent can do for you. What about the bad news? Even the bad news has some good news inside of it for the consumer: If an agent makes a mistake (such as selling you an insurance policy that is supposed to meet your needs but doesn’t), that agent may well be liable to you for malpractice; something known in the industry as Errors & Omissions. Your insurance agent has an Errors & Omissions insurance policy, just like a surgeon has a malpractice insurance policy. Your lawyer can file suit against the agent – and their malpractice insurance – to recover damages you suffer as a result of a failure to act properly in your interests. Its no fun to think about for the agent or the consumer, but as unpleasant as it is for all concerned, this is a layer of protection that a consumer enjoys when working with an agent.