Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
Shopping for insurance can feel like an uphill battle, especially if you’re unsure of what insurance you need. Working with an insurance broker can help you navigate the rough waters of an insurance decision by understanding your coverage needs and providing you with quotes from multiple companies.
What Is an Insurance Broker?
An insurance broker is someone who can sell insurance from multiple companies.
Insurance brokers work with consumers to compare insurance rates for car, life, home and health insurance. Essentially, they act as a middle person between you and insurance companies by gathering quotes on your behalf. Once they have various options to present, they can then help you make a better, more well-informed purchasing decision based on your coverage needs.
When Should I Use an Insurance Broker?
There isn’t a one-size-fits-all solution when shopping for insurance. Some insurance buyers prefer to go it alone, while others with more complex needs or questions will benefit from the assistance of an insurance broker. Here are some reasons you could benefit from working with a broker.
- You don’t want to spend time sifting through and comparing insurance quotes.
- You want an expert’s guidance so you can understand policy terms and limits.
- Your insurance needs are complex, such as owning investment properties or a classic car collection.
- You’re a business owner and need business insurance.
Related: Insurance for a Classic Car
Business Insurance Made Simple
Compare Free Quotes From Top Insurers at Simply Business. Get a Policy in Under 10 Minutes.
How Do I Get an Insurance Broker?
The first step to identifying an insurance broker is to ask the people you trust—your friends, family and colleagues. You can also search the internet for brokers in your area specializing in the type of insurance you’re searching for. For example, California residents can visit the Independent Insurance Agents & Brokers of California website to search for local brokers.
Once you select a few potential candidates, it’s wise to vet them. First, ensure they are licensed in your state. You can usually check licensing on the website of your state department of insurance.
You’ll also want to ensure that the broker has experience with the type of insurance you need and can connect you with reputable insurance companies that sell those policies. For example, if you own a business and need general liability coverage, you’ll want to find an insurance broker who is well-versed in commercial insurance policies.
How Do Insurance Brokers Get Paid?
Since insurance brokers do the heavy lifting for you, they must get paid for their services, usually in one of two ways: commissions or fees.
Insurance broker commissions
When an insurance broker sells a policy, they will typically receive a commission from the insurance company, which is usually a percentage of the policy’s cost. The percentage varies by insurer and state. The commission is usually already included in the total cost of coverage so that it won’t impact your price.
While you may assume you can sidestep the commission and purchase the policy directly from the insurer to save some money, that’s simply not the case. You will usually pay the same price if you buy directly from the insurance company.
Insurance broker fees
Some brokers may also charge a fee for their services. But the fees you pay and the time frame for when you pay them depend on the insurance broker and the state. The state usually requires insurance brokers to disclose fees. Keep in mind, brokers may charge a fee for new business or policy renewals.
What’s the Difference Between an Insurance Broker and an Independent Insurance Agent?
At first glance, insurance brokers and insurance advisors seem similar. Both professionals sell insurance, hold the same licenses and act as the middle person between consumers and insurance providers.
But the most significant difference between the two is who they represent. Insurance agents usually work on behalf of an insurance company, while insurance brokers work on behalf of folks shopping for insurance policies.
There are usually two types of insurance agents: captive insurance agents and independent insurance agents.
- Captive agents sell insurance for a specific insurer or group of insurers, meaning they are obligated only to sell insurance for that company.
- Independent agents can sell insurance from multiple companies, but they can only sell coverage from companies they have contracts with.
Do I Need an Insurance Broker?
The most significant advantage of working with a broker is they take the mystery out of buying insurance by breaking down the fine print. They also help you understand what a policy does and doesn’t cover. In some cases, insurance brokers may additionally help you avoid coverage types that don’t serve you so you don’t waste your money.
FAQs
For instance, brokers might not have access to every insurer on the market, potentially limiting your options. They may also charge a fee for their services, which might not be cost-effective if your insurance needs are relatively straightforward.
Is there an advantage to using an insurance broker? ›
Using an insurance broker is essential because they work on your behalf to find the best insurance policies that suit your unique needs. Brokers have access to multiple insurance companies and can provide you with expert advice, personalized recommendations, and help you navigate complex insurance choices.
Is it better to go through an insurance broker or direct? ›
There is no constant winner between buying insurance from a broker or direct for all situations. Some customers may decide that the best option for them is a combination of working with an agent and then making their final decision by purchasing a policy online.
Why is an insurance broker needed? ›
An insurance broker's job is to understand your insurance needs, collect quotes from a variety of carriers and present you with the best options. They can also negotiate your rate or identify discounts you qualify for.
What are the pros and cons of using an insurance broker? ›
A broker can also help you find specialized or customized insurance solutions that suit your unique needs. One of the main disadvantages of working with a broker is that you might have to pay a fee or a commission for their services, which can increase the cost of your insurance.
What are the pros and cons of having an insurance broker? ›
The advantages include cost-effectiveness, expertise, and their ability to offer an extensive range of policy options, thus saving consumers looking for coverage time and effort. Similarly, disadvantages include less professionalism and sometimes high broker fees.
Why do insurance brokers make so much money? ›
Commissions: This is the primary way most insurance brokers earn money. When a client purchases or renews an insurance policy, brokers receive a commission from the insurance company. The amount is a percentage of the policy's premium.
Why a broker is better than an agent? ›
The main difference between an agent and broker is the number of responsibilities they're able to take on. A broker can do everything an agent can do, but they have the added responsibility of making sure all real estate transactions are lawful, all paperwork is accurately completed and all finances are accounted for.
What is the difference between an insurance broker and an insurance agent? ›
Insurance agents and insurance brokers can both help you buy an insurance policy. But insurance agents represent the insurance provider that employs them and help sell policies from that single provider. Insurance brokers represent the consumers who use them and can help them shop for policies from multiple providers.
Is it better to go with a local insurance company? ›
Local Insurance Agencies Understand the Area Best
Also, insurance regulations and legislation change from state to state. Therefore, what may be a legal requirement in one state may not be a legal requirement in another, which shows why local knowledge is so critical.
Selling insurance can be a lucrative proposition, with relatively high-paying commissions and a high degree of autonomy with flexible work hours. However, it is not an easy job. You can expect a high rate of customer rejection, stress, and attrition rate.
What type of insurance broker makes the most money? ›
While there are many kinds of insurance (ranging from auto insurance to health insurance), the most lucrative career in the insurance field is for those selling life insurance.
What do clients want from their insurance brokers? ›
According to advice from Marsh, some things to consider when choosing an insurance broker include: Their claims ability and service – including team size and the services they offer. The partnerships and relationships the broker has with insurers and providers. The experience the broker has in your particular sector.
What are the best home insurance companies? ›
The best home insurance companies in May 2024
| Insurance Company | Best for | Average annual premium* |
|---|
| USAA | Best overall | $1,442 |
| Allstate | Best overall | $2,326 |
| Lemonade | Best for digital experience | N/A |
| Chubb | Best for high-value home coverage | $3,578 |
6 more rowsThese industry professionals can work independently or as part of an insurance brokerage firm. So, while an insurance underwriter puts the interest of the insurance company first, an insurance broker serves the customers, helping them find the coverage that suits their needs and budget.
How many insurance brokers fail? ›
The Key To New Agent Insurance Sales Success! Dear Friends, Somewhere around 80% of new insurance agents hired by independent marketing organizations fail and quit within their first 12 months of getting their license.
Are insurance brokers liable? ›
Failure by an insurance broker to make sure that their client has appropriate cover for its business needs may result in that client being exposed to claims for which it is not insured. In that case, there may be a claim against the insurance broker in negligence.
Should you get life insurance through a broker? ›
If you're looking for personalized advice and an easy way to ask questions, then a traditional broker may be a better choice. However, if you know what type of life insurance policy you're looking for and just want an easy way to compare rates, then an online broker may be more convenient.
