Life Insurance Agent vs. Broker: How to Choose
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Agents sell policies from one or more companies they represent, while brokers help clients navigate a wider range of options.
Life insurance agents and brokers typically earn a commission on sales, while brokers may also charge a fee to help you buy life insurance.
Both agents and brokers can be valuable resources when shopping for life insurance as they are licensed experts.
If you’re shopping for coverage, you’ll likely deal with a life insurance agent or broker at some point during the process. Both entities sell life insurance policies, but there are important differences between the two and the ways in which they help you navigate your options. Here’s what to consider before shopping.
» MORE: Compare life insurance quotes
What does a life insurance agent do?
Life insurance agents represent insurance companies to sell policies that meet your needs. In general, there are two types of agents — captive and independent.
Captive agents: They typically work with one insurer and sell products offered by that company. For example, a State Farm life insurance agent primarily sells State Farm policies. A captive agent may be able to offer a policy from another insurance company only if the main insurance company doesn't sell that type of coverage.
Independent agents: They can sell policies from multiple companies, but only those with which they have an agreement to sell.
What does a life insurance broker do?
Similar to independent agents, brokers can sell policies from a variety of insurance companies they partner with. Insurance brokers typically represent the buyers, not the insurance companies.
Some brokerage firms let you compare quotes from various companies and buy coverage online. Brokers can also work more personally with clients to find the best coverage options.
How life insurance agents and brokers are paid
Life insurance agents or brokers typically earn a base salary in addition to a commission, while others work solely on commission.
A life insurance agent's or broker’s commission depends on a few factors, such as the type of policy they sell and the payment structure of the insurer or insurers they work with. Commissions can be up to 40% to 115% of the premiums the policyholder paid within the first year of the policy. The commission usually drops to a lower percentage (1% to 10%) in subsequent years and eventually tapers off. Permanent life insurance policies tend to have the highest and longest commission structures.
Agents don’t usually charge additional consultation fees, so you won’t pay anything extra for a policy that you buy through an agent. Brokers sometimes charge a consultation or advisor fee to help you find the best life insurance policy.
Life insurance broker vs. agent: Which is best for you?
Life insurance agents and brokers offer similar services and usually need a state license to sell insurance. While regulations vary by state, agents and brokers typically have a fiduciary responsibility, which means they are in a position of financial trust. But there are key differences: an agent’s fiduciary duty is to the insurer, then the client, while a broker’s duty is to the client. Both agents and brokers are required to provide accurate and timely information about the policies they sell.
When to use a life insurance agent
If you know the exact policy or insurer you want, you may prefer dealing with one company. If so, you can shop directly on the insurer’s website or through a captive agent who sells that company's products.
A life insurance agent may be a good fit if you:
Know the kind of policy you want to purchase from a company.
Are healthy and want a simple life insurance shopping process.
Don’t want to pay extra fees since agents typically earn commissions from life insurance sales.
When to use a life insurance broker
A life insurance broker or independent agent is a solid choice if you want to see quotes and offerings from a variety of companies. For the widest range of options, choose a broker who works with a large number of companies. A good broker will know the life insurance underwriting guidelines at different insurers and steer you to the one most likely to offer the best-priced coverage. It’s also worth enlisting the help of a life insurance broker if you have a major health condition, a dangerous job or something else that makes you a high-risk life insurance applicant.
A life insurance broker may be a good fit if you:
Would prefer someone to help you shop for life insurance.
Have a more complex health or financial situation and need additional insight.
Don’t mind paying a state-regulated consultation fee for personalized recommendations.
» MORE: Average life insurance rates
How online agents or brokers work
Shopping online through a broker or agent is a good idea if you require minimal help because you know how much life insurance you need and the type of policy you want.
If all you need is term life insurance, an online agent or broker might fit the bill. Term life lasts a set period of time, such as 10 years or 20 years, and is typically the most affordable life insurance. These policies are sufficient for the majority of people, and most insurers offer them.
Some companies sell same-day term life policies online. This type of instant life insurance coverage offers a quick application process that doesn't require a medical exam for many applicants. While it’s convenient, coverage can be more expensive as the insurer doesn’t have a complete picture of your health and lifestyle.
How traditional life insurance brokers or agents work
A traditional agent or broker offers a more personalized experience, typically doing business face-to-face or over the phone. Choose this type of service if you need more support than an online platform can provide, or if you need permanent coverage, such as whole life insurance. A permanent policy covers you for your entire life and includes cash value that grows tax-deferred.
Permanent life insurance is more expensive and complex than term life, so you may prefer to talk through your options with an agent or broker before making a decision.
If you’re not ready to meet with an agent or broker, consider talking to a fee-only insurance consultant. These advisors don’t make commissions on product sales, so they can advise you on what to buy without being biased toward the amount or type of coverage.
How to choose an agent or broker
It’s important to find a life insurance agent or broker who understands your goals. Once you decide between an online or traditional agent or broker, asking for referrals from friends, family or community members can be a great place to start.
You can also find trusted agents and brokers online, including companies that specialize in coverage for specific groups, like life insurance for seniors.
These questions can help guide your search and ensure you choose a reputable agent or broker.
Which life insurance companies does the agent represent? Make sure the agent or broker sells policies from insurers you want to do business with. Check out our best life insurance companies list to help narrow your options.
What professional designations does the agent or broker have? Common designations that show a commitment to specialized education in life insurance are CLU, chartered life underwriter, and ChFC, chartered financial consultant. You can confirm an expert’s credentials at DesignationCheck.com.
Does the agent or broker have experience working with people like you? Let’s say you need life insurance to fund a buy-sell agreement. Ask if the agent has worked with other small-business owners with life insurance.
Does the agent or broker pay attention to your needs? An agent should understand your financial situation and tailor recommendations to fit. Avoid anyone who tries to pressure you into decisions or products you don’t need.
Is the life insurance agent or broker licensed in your state? You can check through your state’s insurance department to see if an agent or broker is registered.
Insurance departments by state
Click on your state to visit your local insurance department’s website and learn more about requirements or to verify an agent's or broker’s license.
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