Both an insurance agent and a broker will help you obtain insurance policies.1 Agents and brokers exist in all lines of insurance, including auto, home, and life insurance. They are licensed in the state that they do business in to solicit and transact insurance business.
The fundamental difference between the two is that the insurance agent works for the insurance carrier, while the broker works for the consumer. That may seem odd, since both are helping the consumer buy insurance, but as we look at what the agent versus broker can and can’t do, we start to see how the difference affects the insurance buyer.
Because insurance agents work for the insurance carrier, they can complete insurance transactions. This is called binding a policy. If an agent takes a payment on the insurance application, it is said to be bound. That means coverage has started.
Essentially, the agent is acting as a limited field underwriter to start the policy. Brokers can’t bind coverage; they only facilitate transactions.
But because brokers are not tied to any specific carrier, they can present more policy options to consumers. This is different from agents who can present only insurance policy options from the carrier(s) they are appointed with. An agent may be with one or more carriers but will still be limited to offerings from those carriers. Ultimately, the insurance broker is able to offer more comprehensive options from a broader range of insurance carriers.2