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Buying direct vs using an agent


We are now a couple of decades into the 21st century, so the new conventional wisdom would tell us that we should no longer be doing things the way they were done in the 1950’s. Haven’t we cut the middleman out of everything by this point? So why on earth do insurance agents still exist? That’s so 20th century.

Indeed, if you are a so-called “digital native,” meaning that you don’t remember a time when there wasn’t an Internet, this probably makes perfect sense to you. Having anything or anyone except a fiber optic cable between you and a purchase serves only one purpose – to make it more expensive. And because consumers have no desire for things to be more expensive, we assume a go-between can only be a bad thing.

It’s hard to argue with this thinking if the product is relatively commoditized, like a plastic widget from China, where we know exactly what we need and are only seeking the lowest price. The story can be a bit different when it comes to car insurance.

The Benefits of Buying Direct

The digital native view of buying car insurance is actually a good one for many drivers. Your needs are fairly straightforward, so you generally know what you need. With the direct method, you can shop and purchase on your own schedule, over the phone or the Internet, without having to worry about when someone else is available to meet with you. You can do it from the comfort of your home or anywhere you happen to be.

Buying direct also allows you to do some very efficient comparison shopping. Sites like give you the opportunity to get multiple quotes from different insurers and compare them, with effectively zero legwork. Choosing from among a number of quotes can certainly help you find a better price for coverage, and in general buying direct can save you money compared to buying through an agent, whose commission is factored into your price. Depending on which source you rely on, buying through an agent can cost between an additional 5% and 20% on a new policy.

Another benefit of avoiding agents is that you won’t feel any pressure to make a purchase like you might if you were face-to-face with a human being whose paycheck depends on you buying. Not to mention, for independent agents, who sell insurance from more than one company, they may have incentives to steer you toward one company over another because they make a larger commission – even if it is not necessarily the best product for your needs.

Once you’re a customer, whether you have an agent or go direct, most insurers now have a host of online tools that can help you manage your policy, ranging from useful websites to mobile apps. You can make payments, file claims, add coverages, etc. These are what any Internet-savvy consumer expects from a service provider, and they certainly make handling your insurance policy more convenient, especially for customers who are going direct.

Everything we’ve laid out here makes it clear: most drivers can do just fine buying and managing their car insurance policies directly, without an agent. But that’s not the final word on the subject.

The Benefits of Buying Through an Agent

Even with the many upsides of purchasing direct, agents clearly offer some customers services that deliver meaningful value. First and foremost is, to modify a well-known phrase, “With great power (to buy directly on the internet) comes great responsibility (of making all your own decisions, without an expert to help guide you.)”

Without an agent you are on your own. Yes, you have access to a vast trove of resources online, as well as the company’s customer service call centers, to help you. But if your needs are more complex, either while buying coverage or filing a claim, you could be left with a lot of doubt about what you’re doing and how you’re doing it – at precisely the wrong times.

Doubts about insurance can have serious implications, especially if you have a lot of assets to protect. But it’s also true if you don’t have a lot of assets and would be very adversely impacted by something like a several thousand-dollar expense that turns out not to be covered because you didn’t properly choose your coverage.

With an agent you will be able to work “directly” with a local expert on car insurance in your area, and possibly someone you already know from another part of your life. Because of the enormous liability implications associated with driving a car, it is crucial that you have sufficient coverage to protect much more than just your car.

No one wants to think about all the terrible scenarios that could result from an accident, both physically and financially. Fortunately, doing just that is your agent’s job. An agent will have an extensive knowledge of the specific coverages you need based on your financial, business, and family situation.

The stakes increase dramatically if you have a million dollars or more in assets, because at this level you are a target. If you are involved in a serious accident without having all the coverages necessary to protect those assets, the financial stability you have worked so hard for could be destroyed. Given the stakes, it’s not a bad idea to have an expert who knows your situation weigh in with some advice when you’re choosing coverage, in order to minimize the chance of a financial catastrophe.

Agents can also be valuable for providing a “total insurance relationship,” meaning that they may be your conduit not just to car insurance, but also to other policies you need such as homeowners, renters, life, business, etc. Often by taking a holistic view of your full insurance needs an agent can put together a package that delivers significant discounts for bundling in ways that you would not have found for yourself. Depending on the extent of your insurance needs, these savings could make up for any higher premiums you might face as a result of using an agent for a single policy.

Having an agent can also be a great comfort when crisis hits. Whether you have endured a car accident, a fire, or some other mishap, it is fair to say that you may be dealing with considerable personal challenges and strain. Having an agent by your side to help you work through the insurance side of the problem and keep you out of the red tape can be the most important aspect of the entire relationship. A good insurance agent will go to bat for you to get the money you are owed by your insurance company, which might try to drag its feet on approving certain claims.

To sum things up, there is no perfect answer to the question of “Agent or direct?” Like so many things in life and business, it depends heavily on your specific situation, needs, knowledge level, risk, and appetite to roll up your sleeves and do certain things for yourself. One possible solution when it comes to buying car insurance is for you to put in slightly more work on the front end to arm yourself with as much knowledge as you possibly can. Follow our recommendations for getting multiple quotes on your own to compare insurers, and then also talk to an agent or two. See if the agent is able to match what you can get by going direct. If they can, you may be able to have the best of both worlds – the personalized service of an agent and the lowest price. It’s worth a shot!