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Life Insurance Agent

insurancebrochure Life Insurance Agent

Middleman, not

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 to the consumer what it is offering. Should it do media advertising and hire employees to bring in applications or is it more cost-effective to pay independent contractors a commission? Just as their decisions result in hiring employees, the life insurance company also decides whether or not agents or brokers, ie, the independent ocntractors, will exist as an occupation.

Some people assume 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. That is completely wrong. A typical life insurance agent is paid a commission as an independent contractor for producing a successful application if the premium is paid by the policyholder.

There are large agencies that act as insurance consultants to large corporate clients in some complex areas of commercial insurance. They charge consulting fees for their insurance consulting services. However, an insurance "broker" who deals with many insurers is not a like a real estate broker who charges a fee to real estate owners for listing and selling property. The insurance agent/broker is just an independent contractor who is contracted with many insurers and is paid a commission set by the insurance company for policies issued as a consequence of applications delivered.

Agent, Broker, and Producer

For the buyer of life insurance, there is no practical difference between alife insurance agent and a life insurance broker. In many states there is now only one license, that of "insurance producer" because the function of the licensee is to produce applications for insurance companies. They may be called agents or brokers, according to preference, but they are all producers. The words are printed on some licenses just this way - "Insurance Producer License". Some laggard states may still have both agent and broker licenses, but that makes no significant difference when buying life insurance from an independent life insurance agent.

Most life insurance companies have decided that it is more cost effective to pay individuals as independent contractors for disseminating information and bringing in applications rather than paying them as employees for the same task. The managers of the life insurance company control the process, agents do not.

Agents/brokers/producers, including those offering quotes online, do not conrol or negotiate anything, 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.

Financial products from life insurance companies are not sold to insurance agents for resale. The insurer creates 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 salaries to employees and hope that they will produce.

Life Insurance Agent and Dealing Direct

The assumption that there is an advantage to "dealing direct" with the insurance company instead of "through" a life insurance agent is mistaken. When a policy is applied for using the help of an insurance agent, that is dealing direct! The agent is just helping you apply. Working with an employee costing the insurer a salary is no more dealing direct than working with a contractor who is paid on commission. Either way, you are buying direct from the insurance company. The producer has no insurance to sell or resell. Only the company has a product to sell. The contractor/producer can only tell you about the insurance and hope that you will give him/her the application instead of to someone else.

Life Insurance Agent

The insurance licensee/producer/agent decides nothing about what the premium for the policy should be. So searching to get the same insurance company product cheaper from one agent than another is a total waste of time. The insurance company sets the premium for the assigned rate class that the applicant is given by the insurer, period. The insurance company sets the commission and the product premium, period. The producer's opinion is irrelevant. The producer negotiates nothing. The producer produces applications. If there is some obscure insurance company somewhere that operates differently, it is an unusual exception.

What is the Value of an Agent?

An independent life insurance agent can help the life insurance buyer significantly because they can deal with just about any insurance company that uses independent producers. Most life insurance companies are that way. Our online data base quoting system has the rates for over 140 of the most competitive life insurance companies. You can get quotes online and remain anonymous until you decide you want to apply.

Local Agent

A local agent can help, but may be limited in the number of choices that can be offered. On this website, we have the largest database of life insurance offerings that we can find.

Life Insurance Alternatives

¶ Nothing here constitutes advice or recommendation of any nature, whether legal, tax, financial planning or otherwise. The above comments represent only the author's understanding of the subject and may be incorrect or out of date.