When you buy life insurance, using a life insurance agent or broker can help you get the right policy at a competitive price. Agents work with life insurance companies and brokers work on the customer's behalf to help them navigate the process of buying a life insurance policy.
Each state’s department of insurance sets insurance commission rates, so while agents and brokers earn money on the policies they sell, there’s no extra cost to the consumer. You can shop around for life insurance on your own, but using a professional who knows the ins and outs of life insurance, such as an agent, can save you time and money.
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.
An agent can help you understand your options – from what type of policy is best for you to who you should name as a beneficiary. It’s their job to try to sell you a policy, but they should also know what kinds of policies are available and which would be a good fit for your financial situation and your lifestyle. That includes making sure you’re not buying more coverage than you need.
Agents should know a life company’s policies inside and out and should be able to answer any questions you have about buying life insurance coverage, like:
In addition to buying the right type of life insurance, you’ll want to find an insurer that offers you the best rate. Insurers will charge you a higher premium if your medical data, age, or hobbies indicate that you pose a higher risk. An independent sales agent could help you figure out which insurer penalizes certain health conditions or lifestyle choices more than others.
Depending on your health needs, some life insurance companies are a better fit than others. Check out our definitive breakdown of the best life insurance companies to get a sense of what’s out there before meeting with an agent.
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 brokers and agents must be licensed to sell insurance. Although they both work with insurance companies 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,” adds Jake Herskovits, Life Insurance Team Lead at Policygenius. Without the incentive from any single insurance company, an independent broker is often better suited to provide unbiased advice that puts your best interests first.
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 noncaptive agents or independent agents) develop relationships with a large number of insurance companies and can help you compare policies from each. They may also sell additional insurance products, like disability insurance, homeowners insurance, and auto insurance.
If you're looking for a detailed description of a specific insurance company's products, one of its agents may be the best person to talk to. However, if you're trying to comparison shop across multiple insurers, you’re better off contacting a broker who can help you evaluate policies from several different companies.
How do life insurance agents make money?
In most cases, life insurance agents won’t charge you anything if you work with them to buy life insurance. So how do they get paid?
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 comparison shopping 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 and 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. Different resources might have conflicting or inaccurate information, especially as federal and state insurance laws change each year.
Pros of life insurance agents
They handle the back-and-forth It’s an agent’s job to help you navigate all the nuances of life insurance and guide you through the process of buying a policy. While you can compare and apply for life insurance entirely on your own, sometimes that means a lot of waiting for a response from an insurer before you know where you stand in the application process. An agent can update you as your application advances with the insurance company and handle the back and forth so you don’t have to.
They help you shop around It’s also useful for someone to have all your information on file in case your application gets declined, which could happen if you fail to disclose medical conditions or if a company deems you too risky to be covered. If you make improvements to your health and lifestyle, the agent can automatically submit your application again when you’re ready. Agents who can offer you multiple types of insurance, such as disability insurance, may even be able to reuse your information across applications if you need more coverage.
Cons of life insurance agents
Commission-based sales A life insurance agent is essentially a salesperson. 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. You could be roped into a life insurance policy that offers way more coverage than you need, with premiums much higher than you’d pay for the appropriate amount of coverage. Before working with an agent, it’s a good idea to make sure they’re licensed in your state, and to read any reviews they might have.
Not sure how much life insurance you might need? Our life insurance calculator will give you a tailored recommendation. We can also help you compare quotes from multiple insurers.
Come armed with that info when you’re ready to meet an agent, and you won’t need to accept the first offer. Or simplify the process even more and use Policygenius to sort through available life insurance options and apply online.
Frequently asked questions
What’s the difference between an agent and a broker?
Captive agents work for one specific insurance company, while non captive agents – also called independent agents – and independent brokers do not represent any single company.
How does a life insurance agent make money?
Most agents earn a percentage of the premiums on life insurance policies they sell. Each state’s life insurance department regulates rates, so commissions are already included in the price you pay, regardless of which agent or company you use.
Do you have to use an agent or broker to buy life insurance?
No, you can apply for insurance on your own directly through insurance companies. But a licensed broker or agent can help you compare rates, explore options, and handle the back and forth while your application is underwritten.
How much does it cost to become a licensed life insurance agent?
The total cost varies by state and includes fees for required courses, exams, and licensing. Costs commonly run $40-100 for each course, exam attempt, or license application, but may be higher in your location.