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Life Insurance Agent

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Agent, Broker, Producer

Life insurance agents are licensed in most states as "producers" because they produce applications for insurance companies.

They may also be known as "brokers". For the most part in most states, there is no practical difference between agents and brokers, unless the producer is a captive agent, i.e., the producer is limited contractually to sell only the products of one insurance company. A few states may still attempt a licensing distinction between agent and broker, but the distinction seems to be of little practical benefit to the consumer.

In the case of the life insurance producer, most are not captive and can help you get insurance from however many life insurance companies they want to deal with. See our extensive online quoting.


There are some common misperceptions about insurance producers. One is that producers make their own rules and charge insurance companies a fee for selling insurance. It's as if the occupation of insurance producer could survive on an independent basis and can make demands on insurance companies. Instead, the occupation of insurance producer is completely dependent on the existence and decisions of insurance companies and is completely subject to the rules, terms, and conditions dictated to producers by the insurance companies.

Most life insurance companies have decided that it is more cost effective to pay individuals as independent contractors for selling insurance coverage and bringing in applications, rather than paying them as employees and paying for media advertising to attract prospects. The managers of the life insurance company control this process, producer/agents do not.

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Insurance producers are paid as independent contractors by insurance companies because that suits insurance companies, not because producers have any say in how it's done.

Life insurance producers do not charge insurance companies anything whatever for selling insurance policies. They are paid whatever the insurance company mandates, period. There is no negotiation. The insurance company has the insurance and makes the rules from start to finish regarding the marketing of that insurance.

Another misperception is that producers obtain insurance from insurers and then resell it at a profit. That's what some people seem to be thinking as they go to different insurance producers trying to get the same policy from the same insurance company at a cheaper price.

Agents/brokers/producers, including those offering quotes online, do not control or negotiate insurance, they just bring in applications. So price shopping amongst agents/brokers for a better price for the products of the same life insurance insurer will be fruitless because you will always end up with the same price.

No Middleman

Some people have so little idea as to how things work that they think that the same insurance could be cheaper if they buy "direct" from the insurance company instead of using the help of a producer. The fact is that you are always buying direct from the insurance company no matter who helps you apply, so the price must be the same. Insurance companies do not offer a lower price just because you use an employee's time instead of an independent contractor's.

A life insurance company designs its own products, prices its own products, and decides how to market its products. Each life insurance company decides who to use to explain its products to the consumer. Should it do media advertising and hire employees to bring in applications or is it more cost-effective to pay independent contractors a commission for results only?

Just as company management decides on the hiring of employees, or paying for advertising, the life insurance company also decides whether or not producers, i.e., the independent contractors, will be used to bring in applications and even be an occupation. Financial products from insurance companies are not sold to life insurance agents for resale.

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Insurance companies have created the occupation of life insurance producer because most insurance companies have found that it is cheaper to pay independent contractors a commission only if they produce rather than pay for extensive media advertising and pay salaries to employees and hope that they will produce applications from media-driven inquiries.

The assumption that a life insurance agent or "broker" is a middleman who possesses insurance for sale and may charge a fee or add something on top of what the insurance company charges can lead to the wrong approach in shopping for life insurance. The life insurance producer is paid a commission as an independent contractor for producing a successful application provided that the premium is paid by the policyholder.

There are agencies that act as insurance consultants to large corporate clients in some complex areas of commercial insurance. They charge consulting fees for their consulting services. That's different. The producer that you deal with to buy life insurance does not charge any fee. Help is not the same as fee-paid consultation.

An insurance "broker" who deals with many insurers is not like a real estate broker who charges a fee to real estate owners for listing and selling property. The insurance broker-producer is paid the set amount for policies issued as a consequence of applications delivered, unlike the stockbroker who charges its customer a transaction fee for trading stocks or bonds.

Local Agent or Online

Most life insurance companies use independent producers. Independent life insurance agents can help the life insurance buyer because they can help with just about any insurer that uses independent contractors, provided of course, that the producer does not want to limit what is offered to a small number of companies.

A local agent can help, but many are limited in the number of choices that they will offer. On this website, we have the largest database of life insurance offerings available to use. It includes the rates for over 120 of the most competitive life insurance companies. You can get quotes online anytime.

Since you are buying from the insurance company, not the agent, and since there is usually very little servicing to be done on a life insurance policy, choosing an agent based on geographical location has little benefit in the age of the internet.

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