The Advantages of an Insurance Agent

by Rick Mayhew, CPCU, CIC, CLU, ChFC

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I can see your eyes rolling at this point. Everyone has heard all the funny stories about insurance agents. As Woody Allen said, "There are worse things in life than death. Have you ever spent an evening with an insurance salesman?" Actually you don't need to spend that much time to get the full benefit of having an insurance agent.

For a lot of people the goal is to reduce their insurance costs. The question is, "Why not just go online and get the cheapest price you can find?" Unfortunately, finding the lowest price is not always the best way to go. There are several ways to reduce costs. You can drop coverage, restrict coverage, reduce coverage limits or just skip insurance altogether. Knowing what to do in each of those areas is one of several reasons to have a good insurance agent.

Insurance is a very complex legal document. In some respects, many insurance contracts have more moving parts than a jet airliner. You'd want some training before flying one of those, wouldn't you? Having an insurance agent is like having a pilot to handle that for you.

You also want to get a very good deal on your insurance. My choice is to purchase through an independent insurance agent who represents several companies. If an agent has only one company, then regardless of whether that's the best deal for you or not, that's the company which will be presented. Having only one company affects the price and also the coverage an agent can offer. For example, I needed a specific policy several years ago and my independent agent had a company who could provide it, but not every company he represented offered it.

Once an independent agent has analyzed your coverage requirements, they can check pricing with each of the companies they represent to see who offers the best combination of coverage and price. The priority is the coverage because the price is meaningless if you don't get what you need. Some independent agents represent several companies and some have over fifty. If you checked this many companies yourself, it might take you awhile to go online and enter your information separately for each company to compare their offerings.

There are many ways to drive the price down. You can reduce the limits of coverage, buy less broad coverage and skip some coverage altogether. Knowing what to do on each of these is beyond the scope of this short article, but a good agent can help you work through the process.

The important thing is to remember every single loss you have is insured. Either an insurance company pays for it or you do (out of your own pocket). You just need to decide how much risk you are able to handle yourself.

Several years ago a well-known financial guru suggested in one of several books he wrote that people could drop their uninsured motorist coverage if they had other insurance. He lost several lawsuits on this point and his son, who worked for his father's organization and was giving the same advice, testified under oath he didn't really know what uninsured motorist coverage was. Those are not the people I want to get my insurance advice from.

Stick with a good agent who has been around awhile, knows the business and continues to improve his education. And before you drop any coverage you have, get a second opinion and ask under what conditions you would have to pay out of your own pocket if you don't have the insurance. In other words, make informed decisions about your insurance choices.

Rick Mayhew is a financial planner in St. Louis who worked in the insurance business for 25 years. He is currently writing a book on personal finance. He can be reached at

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