Buying an Insurance Policy: Three Ways to Do It

An insurance agent and her older female client. — (Image credit: Getty Images)

Purchasing insurance policies these days can be expensive. Am I right? Not only that, but understanding what may or may not be covered on your insurance policy is feeling more and more like a game of chance. With insurance policies appearing to get more complicated and costs going in only one direction, the question of how to purchase an insurance policy becomes mammoth. Let’s look at three ways to purchase an insurance policy. You can watch my video about this here:

1. Direct to consumer

There was a time when you could go to a local Sears store (if you’re old enough to remember those) and visit a little booth where an employee of an insurance company — let’s call him Marty — would offer you car insurance. (I know, right?!) Once this concept of Marty at Sears went away, insurance companies still wanted to have direct access to the public to offer them insurance. There were two basic ways to do that — one was to have an employee call people and offer them insurance over the phone (aka known as cold calling), and the other was to mail people a quote (cold mailing?). As you can imagine, especially with the mail option, there wasn’t a lot of interaction, and the consumer was in the position of having to decide what coverage to get, with what options and deductibles. The consumer did it all, unaided.

Fast-forward to 2024, and we have another method that insurance companies can utilize to reach out direct to the consumer. Any guesses? Anyone? Anyone? Yes, the internet. Now an insurance company can have even less connection with a consumer and offer an insurance policy. Woo hoo! Now, after only a few button pushes and mouse clicks, or taps on your rectangular piece of Gorilla Glass, you can get a quote and buy insurance. Wow. Quite a transition from Marty at the Sears store. The consumer is entirely on their own and even more removed from the insurer — even removed from a person, a voice, a letter or even an email. It’s like getting out of a vending machine.

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2. Insurance agents

What if a consumer wants to get some information about an insurance policy? What if they want a little help in deciding on coverage? What if they truly don’t know what it is they want or need and would like to enlist the assistance of, well, I don’t know, a licensed insurance professional? Got you covered — pun intended. Another way to purchase insurance is with a licensed insurance agent.

Karl Susman

Karl is an insurance agency owner, insurance expert witness in state, federal and criminal courts, and radio talk show host. For more than 30 years, Karl has helped consumers understand the complex world of insurance. He provides actionable advice and distills complex insurance concepts into understandable options. He appears regularly in the media, offering commentary and analysis of insurance industry news, and advises lawmakers on legislation, programs and policies.

An insurance agent is typically an employee of an insurance company who can offer you the products and services of that insurance company. Now, I won’t get into the legal definition of an agent, but for the sake of this illustrious column, we’re speaking about one person who is licensed and represents one insurance company.

This person knows their product like the back of their hand. It is the product that they have been trained on and the one they sell. It is the product that they service in most cases, the product that they are paid to sell. The insurance company will usually even give that employee agent the ability to offer coverage, as long as they are following the guidelines immediately without even asking the insurance company directly, called binding or beginning coverage.

3. Insurance brokers

Clearly, you get more out of an insurance agent than you do going to an insurance company directly. There is one caveat, one piece of the puzzle that is missing. I’m talking about that puzzle piece that you don’t notice is missing until you are done with the puzzle, and you just lose your mind looking for it. An insurance agent can only offer you the insurance policies that the insurance company they work for — again, broad language here — permits them to sell. An insurance broker, though, is able to provide consumers with policies from any company out there that is willing to do business with them.

So a licensed insurance broker has the ability to work with literally hundreds of insurance companies to find the specific insurance product that works for you. Moreover, they have the ability to shop around for — wait for it — a better price! It behooves an insurance broker to find the best price and product for you because that is what will keep you working with them.

Insurance brokers pride themselves on not being tied down to any one insurance company, or any one insurance product. If one insurer raises its rates, a broker can offer their client a less expensive insurer. If an insurer non-renews a client, a broker can find another insurance company to provide coverage to their client. These are key factors that an insurance agent, representing one company, simply cannot do.

We have come a very long way in the insurance industry. Times are definitely continuing to change, and I have no doubt that AI will soon be able to speak to you like it’s a person, offer you an insurance quote and even sell you a policy. Buyer beware.

Want to learn more about insurance? Visit KarlSusman.com.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Karl Susman is a veteran insurance agency principal, nationally engaged insurance expert witness and broadcast host who translates insurance from jargon to judgment. For more than three decades, he's helped consumers, courts and policymakers navigate coverage, claims and compliance. As Principal of Susman Insurance Agency, Karl works directly with households and businesses to compare options and make clear, defensible coverage decisions.