The next thing to consider when entering the insurance
business is how you are going to be employed: as an agent or a broker. Each type of insurance professional has its
advantages and disadvantages. Sometimes,
working as one may be better when you are entering the business. Then, after you have improved your skills, a
change might be appropriate.
An insurance agent is a person who is employed directly by
an insurance company, such as Allstate or MetLife. This person is paid from the company, with
all of the rights and responsibilities that come with that—such as having taxes
taken out of each check.
Now, depending on the company for which the agent works,
different rules about what insurance can be sold applies. For example, some companies allow agents to
sell products of other companies if it is in the best interest of the
consumer. Other companies, however, only
allow their agents to sell their insurance products. An insurance broker, on the other hand, is typically an
independent agent who works for the best interest of the consumer. When a consumer comes to a broker, the broker
searches several companies to find the best prices.
The advantage of working as an agent for a company is the
name recognition that comes with working for an Allstate, MetLife or New York
Life. In addition, the company provides
more support to assist with keeping track of insurance licenses, providing
guidance, especially for new agents, and other resources.
The disadvantage, however, is similar to working with any
major corporation. You must follow the
usually stricter rules of the company.
In addition, as a new agent for a major corporation, a great deal of
time is usually required to attend mandatory training sessions and
meetings. The bottom line is that you
have less overall control because you are working for someone else.
The advantage to being an independent insurance broker is
that you truly have almost complete control.
Most brokers are independent business people who are running their own
business. As long as you operate your
business within the rules of the individual State Department of Insurance, and,
of course, local business rules, you have a lot of independence.
The disadvantage that comes with being a broker is that you
must operate an independent business.
You must organize a business, obtain appropriate insurance, which
includes Errors & Omissions insurance that protects insurance agents and
brokers from lawsuits, and run the business with less assistance and resources.