A life insurance agent works to sell insurance life insurance policies to consumers. Life insurance agents can either work independently or for an insurance company. Buying life insurance through an agent or broker can help you get the right policy at the best price.
What is a life insurance agent?
A life insurance agent is a licensed professional who sells insurance policies to clients on behalf of one or more insurance companies.
To get a license in their state, an agent must take an accredited course, pass a life insurance agent exam, and complete continuing education requirements every few years for licensing renewal.
How can an agent help you buy life insurance?
An agent can help you understand your options — from what type of life insurance policy is best for you to who you should name as a beneficiary. It’s the agent’s job to sell you a policy, but they should also be working in your best interest.
The agent should know what kinds of policies are available and which would be the best fit for you based on your financial situation and lifestyle.
Agents should be familiar with a life insurance company’s policies and be able to answer any questions you have about buying life insurance coverage, such as:
An independent agent can also help you figure out which insurer can likely offer you the best rate. Some insurers are more flexible with premiums when it comes to certain health conditions or lifestyle choices. Depending on your personal profile, you could pay less with one insurer than another.
Life insurance brokers vs. agents
Life insurance brokers are similar to life insurance agents. Both brokers and agents serve as intermediaries between the insurance companies and customers. Both must be licensed to sell insurance.
An agent who works directly for one insurance company is called a captive agent. Captive agents are more likely to recommend a policy offered by their parent company.
Brokers (also referred to as non-captive agents or independent agents) develop relationships with a large number of insurance companies and can help you compare policies from each.
Independent agents can easily submit your information to another insurance company in case your application gets declined or you receive a final rate that’s higher than expected. If you make improvements to your health and lifestyle, an independent agent can ensure you’re applying with the company that’s most likely to offer you the lowest premiums.
Although they both work with insurers to help shoppers find the right policy, agents are often more limited in the number of companies they work with while brokers aren’t beholden to any single insurer.
“Though agents may be able to offer products from companies other than the one they work for, they are usually incentivized to sell policies only from the insurer that employs them,” says Jake Herskovits, life insurance carrier relations specialist at Policygenius.
Without the incentive from any single insurance company, an independent broker is often better suited to provide objective advice that puts your best interests first.
How do life insurance agents make money?
Most agents earn a percentage of the premiums on life insurance policies they sell — a commission — rather than a set salary. That commission, however, doesn’t come at an extra cost to you because it’s already built into the premium.
Insurance prices are regulated by each state’s department of insurance.
Each insurance company develops rate tables and then files those rate tables with the state’s insurance department.
Because these rates are set beforehand, an agent can’t offer you one company’s policy at a different rate than you’d get by simply going to the company itself.
These pre-set commission rates are another reason why comparing quotes is so important when shopping for life insurance to secure the lowest price.
Some agents may charge clients a fee for their labor instead of earning a commission, but these fee-only agents are rare.
Pros & cons of using an agent to buy life insurance
Buying insurance on your own can be confusing and researching your options is often a challenge, so it’s often helpful to work with an agent in some capacity — whether they’re a captive agent for one company or an independent agent for a broker.
They handle the communication. Sometimes insurance companies can request additional information or documentation as the application process goes on. An agent can update you as your application advances with the insurer and handle the communication so you don’t have to.
They can educate you on your policy choices. If you’re not certain how much coverage you need or which type of life insurance is best for you, an agent can help you understand your options before you buy.
They sell insurance based on commission. Some agents work solely on commission. If you don’t buy a policy, they don’t get paid. And because of the way commission works, the more expensive a policy you buy, the more the agent gets paid. If you’re not working with an agent you trust, you could end up buying a more expensive policy than you need.
Do you need a life insurance agent?
You can buy some life insurance policies fully online, but it’s usually best to speak with a licensed agent of some kind before buying a policy, especially if you have questions about how much coverage you need or which type of policy is best for you and your family.
If you’re looking for information about a specific insurer’s product, one of its agents may be the best person to talk to.
If you want to comparison shop across multiple insurers, you’re better off contacting an independent broker like Policygenius who can help look at policies from several different companies.