Insurance Agencies vs. Insurance Companies in NJ

It’s no secret that many people find it challenging to distinguish between an insurance agency and an insurance company. Many individuals assume they are the same and assume that both terms get used interchangeably. Of course, there is a difference.

When it comes to insurance agencies vs. insurance companies, it makes sense to learn more about their fundamental differences. The following clarifies the two terms and discusses why it makes sense for you to use an insurance agency.

What Is an Insurance Agency?

In a nutshell, an insurance agency is a professional or a group of insurance professionals that sell insurance products to consumers. They do so on a commission basis, but effectively act as an insurance company’s representative.

An insurance agency acts as an intermediary between consumers and insurance companies and has a legal duty to help find their customers the right coverage at the best prices. They must be licensed, bonded, and insured to sell insurance products to customers.

You should keep in mind there are two types of insurance agencies:

  • Captive insurance agencies are professionals that only sell insurance products from just one insurance company;
  • Independent insurance agencies, such as Rosell Insurance Agency, represent a broad selection of insurance companies.

As you might expect, an insurance agency earns commissions through both new insurance products sold and renewals for existing policies. Being the public face of insurance companies, an insurance agency’s aim is to prioritize its customers’ needs.

What’s the Point of a Captive Insurance Agency?

You might be wondering why consumers would elect to buy from a captive insurance agency. After all, an independent one offers a greater choice because of insurance products available from several insurance companies.

The truth is, captive insurance agencies may choose to work with a sole insurance company for several reasons. For example, they may only wish to specialize in very specific niche markets, such as farm insurance or high-risk markets.

What’s the Point of an Independent Insurance Agency?

For some insurance agencies, offering a handful of products from a sole insurance company might be a better fit for their target market. Independent insurance agencies prefer to have an array of insurance products available to encapsulate a large target audience.

Independent insurance agencies like Rosell Insurance Agency don’t just sell products from several insurance companies; they also provide coverage for all kinds of uses. Examples might include auto insurance, business insurance, and home insurance.

What Is an Insurance Company?

An insurance company is an entity that provides or ‘underwrites’ policies sold by insurance agencies. They are the organization that offers insurance products, assesses claims made by policyholders, and pays out when insurance claims from consumers get approved.

As you might expect, an insurance company is heavily regulated by the government. That’s because they must have the financial resources available to cover the risk they protect through the policies they underwrite.

Like insurance agencies, an insurance company must also be appropriately licensed, bonded, and insured themselves. There are two types of insurance companies: mutual companies and proprietary companies.

A mutual insurance company is wholly-owned by the policyholders. Their sole purpose is to provide coverage to its members (the policyholders), and those members get to choose who manages the company.

Mutual insurance companies may also invest in portfolios like mutual funds. All profits generated by mutual insurance companies get distributed to their members through dividends or reduced insurance policies.

A proprietary insurance company works similarly to a mutual one, except that the business gets owned by shareholders. Any profits made by a proprietary insurance company gets distributed to its shareholders and doesn’t necessarily benefit any policyholders.

In any event, an insurance company can choose to specialize in one niche market or offer to underwrite policies for multiple audiences. For example, one insurance company might only provide auto insurance, whereas another may offer that and home coverage.

Insurance companies will sell only the products they provide, unlike an independent insurance agency that can sell products from various companies. They can also sell directly to consumers if those customers wish to avoid using an insurance agency.

Why Use an Independent Insurance Agency in NJ?

You will now undoubtedly have a better understanding of insurance agencies vs. insurance companies and can make a clear distinction between the two. But why should you use an insurance agency in NJ when you can easily approach an insurance company directly?

Arguably the main reason to choose an insurance agency is value for money. As mentioned, an insurance company will only sell you coverage from the policies they underwrite. They won’t offer any products from competing providers.

If you use an independent insurance agency, you’ll get the best value for money because they will recommend products that best serve your needs. Also, they’ll do so while finding you the most affordable coverage available.

Secondly, an independent insurance agency is a professional with whom you can establish a long-lasting business relationship. An advantage of independent insurance agencies is they get to know their clients and learn a lot about their requirements.

That gives them the edge to provide insurance coverage from a selection of insurance companies that best meet their needs. If that same customer approached an insurance company, they are unlikely to get that same level of personal service.

An independent insurance agency can often secure lower premiums for policies than is possible by going directly to insurance companies.

How to Choose the Right Insurance Agency for You

Finally, now that you understand the benefits of using an insurance agency, how do you select the best one for you? When creating a shortlist of insurance agencies to consider, you must ensure that each one is appropriately licensed, bonded, and insured.

Next, you should determine their level of customer satisfaction. Are they interested in forging long-lasting working relationships with their customers, or do they only care about their commissions? And can you approach them with any after-sales questions or complaints?

Consider Rosell Insurance Agency, a long-established, family-run independent insurance agency based in New Jersey that offers a range of personal and business insurance products and serves thousands of customers. We’ll do right by you.