What they do, what they sell, and how they make money
If you’re looking to buy auto insurance, you’ll most likely have to work with an insurance agent, unless you complete the entire process online. Agents represent either a single insurance provider or multiple insurance providers, helping you compare quotes to find the best rates. They also serve as advisors, listening to your specific needs and making recommendations.
In this guide, we’ll explain exactly what insurance agents do and why they’re important in finding the right policy for your vehicle.
While much of our lives occur online, dealing with algorithms instead of people, real-life insurance agents are often still an essential part of the auto insurance-buying process. To purchase insurance, you’ll likely need to speak to an agent either in person or over the phone.
An insurance agent is someone licensed to sell insurance, auto insurance in this case. There are two types of insurance agents:
Agents work for the insurance carrier or carriers that they are connected to, handling insurance transactions from start to finish.
Agents make money by earning commissions on the policies they sell. If you pay for a policy, they’ll get a percentage, with more rewards if you renew your policy. The size of the commision is based on the size of the policy, incentivizing agents to sell policies with high premiums.
What is the difference between insurance agents and brokers? While both agents and brokers sell insurance, where their loyalty lies is different, among other factors listed below.
Here’s how agents and brokers are different:
But many people think agents and brokers are the same thing, and for good reason. Both do the following:
Now that you know what agents are and how they make money, let’s talk about what they’re selling in the first place. All insurance agents are selling insurance coverage, both the minimum coverage required in your state along with supplemental coverage. You can read our auto insurance guide to see exactly how requirements vary by state, but keep reading below to learn what the different types of coverage actually mean.
In order to comply with your state’s laws, it’s important to get the minimum coverage both in terms of types of liability and limits, or how much the provider will pay after you reach your deductible:
The average annual spending amount for car insurance in Virginia was $861.18 in 2019.1
Once you’ve got your state’s minimum requirements covered, you can choose to add on additional coverage. We recommend collision and comprehensive coverage at the very least, but here are all of your options:
Mechanical breakdown insurance does not cover maintenance and wear and tear.3
While you can choose your supplemental coverages, your auto insurance premiums may still be more than you’d like to pay. To lower your auto insurance cost, use auto insurance discounts. Not every provider has every discount, but below, you can see a general overview of the available discounts.
You can get discounts based on your vehicle usage, its equipment, and your education:
Ask your agent which discounts you are eligible for before you choose a policy.
With car insurance, the pros outweigh the cons, especially if you get into an accident. Between medical fees, property damage, and lost wages, buying insurance from an agent can save you thousands of dollars. Regardless, you might not be sure if you can trust an agent, given their incentive to upsell, so we’ve outlined the basic pros and cons of auto insurance below.
Required in most states: Every state except New Hampshire and Virginia requires auto insurance, so in order to comply with the law, you must get the minimum coverage your state requires.
Protects you against high costs: Although it won’t cover all claims you submit, your policy could help you pay for repairs, medical costs, and other costs stemming from a car accident, vandalism, or theft.
Provides helpful services: Aside from reimbursements, some auto insurance policies include useful services like roadside assistance, if your car becomes immobilized and you need help.
Can be expensive: The cost of auto insurance depends on many factors, like the state you live in, your credit score (except in the states of Massachusetts, Hawaii, Michigan or California), and how many miles you drive per year. However, it’s not cheap, usually. The average annual expenditure in the U.S. for auto insurance was $1,057 in 2020,5 so unless you get $1,057 worth of coverage and the cost of your deductible, buying auto insurance will typically make you lose money. However, you’ll lose even more money if you don’t buy auto insurance and get into an expensive accident; better safe than sorry!
Won’t cover all submitted claims: Not every claim you submit will be covered. For example, if you don’t have comprehensive coverage, auto vandalism isn’t covered. When agents suggest you buy additional coverage, they’re not just thinking of their commission; the more coverage you have, the more likely it is you’ll be compensated for vehicle incidents.
When you work with an agent, you can think of it as placing a bet. You’re betting the agent that you will get into an accident, while your agent is betting that you won’t.
The best-case scenario is actually for you not to get into an accident, meaning the insurance company has no claims to cover. However, if you do get into an accident, that’s where auto insurance kicks in. Essentially, auto insurance is something useful that you hope you never have to use.
Confused? Talk to your agent about the necessary coverage you’ll need and how you can mitigate costs. This is the advantage of buying insurance from an actual agent rather than completing the entire process online. You can benefit from their expertise and find a policy that’s right for your vehicle and family.
To learn more, keep reading our auto insurance FAQs below.
Learn more about auto insurance agents in our frequently asked questions, which come straight from readers like you.
Auto insurance isn’t necessarily cheaper through an agent. Buying auto insurance from agents or online can garner you the same rates and discounts, which vary depending on the provider. But while auto insurance premiums aren’t cheaper through an agent, buying insurance from an agent is free, unlike buying insurance from a broker.
A car insurance agent sells insurance to clients and advises them on the proper policies. Car insurance agents also serve as a point of contact for clients, helping them with claims and upgrades to their policies.
It may or may not be worth it to use a car insurance broker, but if you want to shop a wide variety of policies or buy hard-to-place policies for something like long-haul trucking, it may be worthwhile. However, if you want to avoid paying a broker’s fee, which could be around $250, then you should use an insurance agent instead.
No, it doesn’t. Insurance agents get commissions from the insurance provider you go with. Insurance brokers, on the other hand, cost more than agents, as they require broker’s fees.
2018/2019 Auto Insurance Database Report. NAIC. (2022).
AD&D and Accident Insurance. University of Wisconsin System. (2022).
Car Insurance Coverage: Auto Coverage Types & More. Geico. (2022).
What is New Car Replacement™? Liberty Mutual Insurance. (2022).
How Much Does it Really Cost to Own a New Car? AAA Newsroom. (2020).