Agent vs broker
The textbook difference is real. The useful question is a different one.
In principle an agent represents the insurer and a broker represents the buyer. That distinction has legal meaning, particularly around whose knowledge is imputed to whom.
In practice most states now license both under a single producer licence, and the titles get used loosely. So the label tells you less than it used to.
The textbook distinction
- Agent — appointed by and representing one or more insurers, with authority to bind coverage on their behalf
- Broker — engaged by the buyer to seek coverage in the market, generally without authority to bind on an insurer's behalf
Why it has blurred
Most states license insurance producers rather than maintaining separate agent and broker licences, and the same person may act in different capacities across different transactions.
The result is that someone describing themselves as a broker may be appointed by insurers, and someone calling themselves an agent may shop several carriers. The word on the business card isn't reliable information.
The questions that actually tell you something
- Which insurers can you place business with?
- How are you compensated on this recommendation, and does it differ between the options you've shown me?
- Are you appointed by the insurer you're recommending?
- What licence do you hold, and in which states?
- Did you consider other products, and why did you rule them out?
How compensation generally works
Most producers are paid commission by the insurer, calculated as a share of premium. In life insurance, first-year commission is typically far higher than renewal commission, which is worth knowing when someone recommends replacing an existing policy.
Fee-based and fee-only arrangements exist, where you pay directly instead of or alongside commission. None of these arrangements is inherently wrong — an undisclosed one is the problem.
A producer who answers the compensation question directly is giving you useful information. Evasion is also information.
What standard applies
Duties vary by state, by product and by role. Many states have adopted a best interest standard for annuity recommendations under the NAIC suitability model, and some impose broader duties in specific circumstances.
Don't assume a general fiduciary duty applies. Ask what standard governs the recommendation you're being given.
Common questions
In principle an agent represents the insurer and a broker represents the buyer. Most states now license both as producers, so the title tells you less than asking which insurers they can place with and how they're paid.
Usually commission from the insurer as a share of premium. In life insurance, first-year commission is typically far higher than renewal — relevant when someone recommends replacing a policy you already hold.
It varies by state, product and role. Many states apply a best interest standard to annuity recommendations under the NAIC suitability model. Ask what standard governs the specific recommendation.
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This page is general information, not advice about your specific circumstances. A licensed insurance professional can tell you what’s actually available to you.
General information only, not insurance advice. Coverage, availability, and terms vary by insurer and by state, and are subject to underwriting. Quote My Policy LLC is a licensed insurance producer. Nothing here binds coverage.