Guide to Auto Insurance Agents

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.

What Is an Insurance Agent?

An insurance agent is someone licensed to sell insurance, auto insurance in this case. There are two types of insurance agents:

• Captive agents: Captive agents work with one insurance carrier exclusively. An example would be a State Farm agent.
• Independent agents: In contrast to captive agents, independent agents represent multiple carriers, allowing clients to shop multiple companies and compare rates.

What Do Agents Do?

Agents work for the insurance carrier or carriers that they are connected to, handling insurance transactions from start to finish. Learn more about what insurance agents do.

How Do Agents Make Money?

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.

Differences

Here’s how agents and brokers are different:

• Loyalty: While agents are loyal to an insurance carrier or carriers, brokers are loyal only to the client.
• Binding coverage: Agents can bind coverage, meaning complete a policy from start to finish. Brokers, on the other hand, can’t bind coverage; rather, they serve as a middleman between the client and the insurance provider, connecting the two.
• Commissions vs. fees: While agents get paid by commission only, brokers work on both commission and broker fees, which come from the client directly.

Similarities

But many people think agents and brokers are the same thing, and for good reason. Both do the following:

• Sell insurance: Both agents and brokers sell insurance to clients.
• Advise clients: Both agents and brokers can be insurance experts, advising clients on which type of policy suits them best.

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.

Minimum Coverage

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:

• Property damage liability: Every state except New Hampshire and Virginia requires property damage liability, which will reimburse the driver not at fault for damages another driver caused to their vehicle or property.
• Bodily injury liability: All states except New Hampshire, Virginia, Florida, and New Jersey require bodily injury liability for those that cause injuries or death to others while driving their cars.
• Medical payments/personal injury protection (PIP): Only Delaware, Florida, Hawaii, Massachusetts, New Jersey, Pennsylvania, and Utah require medical payments coverage, which reimburses you for medical expenses and lost wages regardless of who is at fault for the accident.
• Uninsured motorist coverage: Finally, Connecticut; Washington, D.C.; Idaho; Illinois; Kansas; Maine; Maryland; Massachusetts; Minnesota; Missouri; Nebraska; New York; North Carolina; North Dakota; Oregon; South Carolina; South Dakota; Vermont; West Virginia; and Wisconsin require uninsured motorist coverage. This will make sure that you’re covered in accidents with uninsured or underinsured motorists, which includes hit-and-runs. Although every state except New Hampshire and Virginia require auto insurance, not everyone complies, so it’s important to get their coverage to protect yourself.

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.

Types

You can get discounts based on your vehicle usage, its equipment, and your education:

• Usage-based: You can get discounts for being accident free, having low mileage, or driving safely with a clean driving record.
• Payment-based: You can also get discounts by paying annually, getting an early quote, paying on time, or enrolling in paperless/automatic billing.
• Education-based: If you take a defensive driving class or a driving training course, you’ll get discounts on your premiums, as you’ll be less likely to file claims.
• Policy-based: Auto insurers provide discounts for continuous insurance, early signing, and policies with multiple people or vehicles. You can also get a discount if you bundle your auto insurance with another type of insurance, like renters insurance.
• Vehicle-based: Some providers offer discounts for hybrid vehicles, electric vehicles, or new cars.
• Insured-based: Many providers discount premiums for federal employees, college students with good grades, homeowners, employees of the provider, those serving in the military, veterans, students away from home, and young drivers.
• Equipment-based: Finally, you can get discounts for teen driver monitoring in the form of GPS navigation, vehicle storage, and other safety equipment.

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.

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.