Imagine that you’ve just purchased a business and you need to buy general liability insurance. How do you proceed? Like other small business owners, you have several options when shopping for insurance.
You can buy coverage online, either from a single insurer or through a website that offers products from several insurers. Another option is to purchase insurance from a captive agent, meaning an agent that represents a specific insurer (such as Nationwide or State Farm).
Insurance may also be available through a trade group or professional organization. Finally, you can obtain coverage through an independent agent. While any of these methods can be effective, there are benefits to using an independent agent.
One advantage of utilizing an independent agent is that he or she is a licensed professional. Agents cannot sell insurance products unless they have a license. To obtain a license, an agent must typically pass a state exam. There are various kinds of licenses, and the type of license an agent has depends on the products he or she sells. For instance, an agent that sells property and liability insurance will likely be required to obtain a property/casualty license. A license is generally valid for a few years. To renew his or her license, the agent must fulfill state continuing education requirements.
You can verify that an insurance agent is properly licensed by contacting your state insurance department.
In many states you can check the status of your agent’s license online by using a look-up function on the insurance department’s website.
Access to Many Insurers
Independent agents represent multiple insurers. Thus, they can obtain quotes on your behalf from several sources. Price and scope of coverage can vary from one policy to another.
Your agent can help you compare policies and choose the one that best suits your needs.
Another advantage of using an independent agent is that agents know what types of businesses insurers want to insure. Your agent’s knowledge of insurers’ preferences can save you time and effort. Rather than waste time submitting applications that are likely to be rejected, your agent will direct your submission to insurers that want to insure your business. If your agent isn’t sure whether your business meets an insurer’s underwriting guidelines, he or she can contract the underwriter directly before an application is submitted.
Some agents are generalists, offering basic coverages that most small businesses need. Others specialize in coverages for certain types of businesses, such as contractors or restaurants. The type of agent you need depends on the size and complexity of your business. Many independent agents have access to a surplus lines broker. This connection can be valuable if you need specialized or hard-to-find coverage.
Help With Claims
An independent agent provides claims services. If an accident occurs, you can report the event to your agent. Your agent will then notify your insurer.
Your agent can help you fill out claim forms and can advocate for you if there is a problem with your claim. Agents are familiar with claims handling procedures and the amounts typically paid for various types of claims. After your claim is paid, your agent can advise you whether the payment amount seems reasonable.
Agents are trained in assessing risks. Your independent agent will review your business operations and help you identify its major risks. Your agent can help you determine which risks are most critical and whether they are insurable. While many of the risks associated with operating a business can be covered by insurance, some risks are uninsurable. Other risks may be insurable but the cost may be prohibitive.
For example, damage to your property caused by war is likely to be uninsurable under your commercial property policy.
Likewise, your liability policy won’t cover lawsuits alleging bodily injury or property damage caused by a release of pollutants that originates on your premises. Depending on the nature of your business, you may be able to buy liability coverage for certain types of pollution losses. This coverage is likely to be expensive. If you can’t afford to insure certain risks, your agent may be able suggest ways to control them to reduce the chance of a loss.
As any insurance professional will tell you, insurance is a people business. Because you meet with your agent in person, you will develop a personal relationship with him or her. As your agent becomes more familiar with you and your business, he or she can provide more personalized service. For instance, your agent may contact you when new coverages become available or when prices on certain insurance drops. Your agent will review your coverages prior to renewal and may suggest changes or upgrades. Many small business owners value this individualized attention.