What are insurance brokers?

When you’re shopping for insurance it can be difficult to understand the terminology, the structure of the industry, how and where to find the best auto insurance rates and more.

One topic that can be particularly confusing is insurance brokers. What are insurance brokers? What is their role in the insurance policy purchasing process? Should I use an insurance broker?

We know this can get overwhelming, which is why we’ve done the work for you.

Read through this article to learn everything you need to know about insurance brokers so you’re prepared next time you need to purchase a policy.

Knowing what insurance brokers are is important, as is getting a free quote. Enter your ZIP code into our FREE tool above to get one right now.

Insurance Brokers and Auto Insurance

What are auto insurance brokers? Just what is the role of an insurance broker? What are an insurance broker’s responsibilities? Is there a difference between insurance brokers and insurance agents? Are there different types of insurance brokers? What do insurance brokers make?

This short video will help explain the difference between an insurance agent and an insurance broker.

Read through the next few sections to find the answers to these and other questions about insurance brokers.

What are insurance brokers?

What is the definition of an insurance broker? According to the National Association of Insurance Commissioners (NAIC), an insurance broker is, “an individual who receives commissions from the sale and service of insurance policies.

These individuals work on behalf of the customer and are not restricted to selling policies for a specific company but commissions are paid by the company with which the sale was made.”

Ultimately their responsibility is to you as the consumer. They are expected to use their expertise in insurance and the insurance industry to find you the best insurer, coverage types, rates, and policy for your needs and lifestyle.

What do insurance brokers do?

Typically what insurance brokers do is focus on the needs of the customer. As we already mentioned, they represent you as the consumer as you’re shopping for insurance. While we’re primarily focused here on what car insurance brokers do, there are a number of types of insurance brokers for different types of insurance.

So what are car insurance brokers? As you might expect, they are brokers that sell car insurance.

With their knowledge and expertise they are able to work with you to determine, based on a number of factors like where you live (does your ZIP code affect your car insurance? — Yes.), your driving habits, your driving record, how many vehicles you have, the unique risks you face, your credit score, etc., the best coverage types and policy for you, as well as which insurance company can offer you the best rates.

What is the difference between an insurance broker and an insurance company?

An insurance broker, as we’ve already discussed, is an individual (or company) acting on behalf of the customer to find an insurance policy that best suits the needs of that customer, from whichever company provides the best mix of coverage and rates. They do not work for or represent a particular company or companies.

An insurance company, on the other hand, provides the actual insurance coverage you need to purchase. The insurance broker (or agent) acts as an intermediary between the insurance company and you as the consumer.

How do insurance brokers make money?

Insurance brokers typically make money in two ways: By fee and by commission. What’s the difference? Take a look at this video.

In considering the insurance broker fee vs commission, it’s important to understand that the commission is standard, while the fee is not. Additionally, both are regulated by the state in which the insurance broker operates.

What do insurance brokers get paid? Typically they are paid a percentage of the total policy as commission. There are different average percentages for different kinds of insurance. We have a few listed in the below table, to give you an idea.

It is interesting to note that while insurance sales are regulated by state laws, most states do not require insurance brokers to disclose their commission rate (though you can ask that they do so). Nevada is an exception to this, as it requires insurance brokers to provide commission rate information to customers.

Commissions are typically paid by the insurance company to the broker. However, broker fees are typically paid by you as the customer.

The purpose of these fees is to compensate the insurance broker for additional services. For example, this can include finding the customer a non-standard policy (because this takes more effort than finding just a standard policy), making modifications to a policy, etc.

These broker fees are also regulated by the states. For example, in California, brokers cannot charge you a fee for finding you coverage through the California Automobile Assigned Risk Plan or California FAIR Plan, which would both be considered more standard policies (so there is no reason for a fee to be charged).

So how much do insurance brokers make? It depends on the type of insurance, the individual, the market, etc. But in general, most insurance brokers will make somewhere between $50,000 and $100,000 per year, with an average salary of $68,857, according to Glassdoor.

What are the disadvantages of insurance brokers?

As you’re aware if you’ve read through everything in this article so far, there are a number of benefits to insurance brokers. A couple of these include that they represent you, so they (should) be providing unbiased advice on policies, and they are experts in their field, which means you don’t have to be.

But what about disadvantages?

While they do represent you, insurance brokers are making a commission off of what they sell you, so there is a chance they will suggest you purchase more coverage than you need (the higher the policy, the more commission they make).

Additionally, brokers often charge fees, as we noted above, which you’ll be expected to pay. These fees can become expensive if you need a non-traditional or non-standard policy, or if you need the broker’s assistance in managing your policy in any way, because typically, after you’ve purchased a policy, any time you ask your broker to handle it in any way, a fee will be associated with the service.

Only you can decide if an insurance broker is the right approach to purchasing insurance for your needs and lifestyle.

What are insurance brokers?: The Bottom Line

Insurance brokers are intermediaries between insurance companies and you as the consumer. They offer expertise and the ability to find you the best policy from the most affordable insurer, given your specific circumstances, and they represent you, rather than the insurance companies.

They are typically paid on commission by insurance companies for each policy they sell, but they may also charge you broker fees if your policy is particularly complex, if you need their assistance managing the policy after you’ve purchased it, etc.

Do you need an insurance broker for your next policy purchase? You’ll have to weigh the pros and cons to decide, given your specific circumstances and needs, as well as what you can afford.

Frequently Asked Questions: What are insurance brokers?

Still have questions about insurance brokers? Read through these frequently asked questions to learn more.

What are insurance agents and brokers?

When considering an insurance broker vs agent, there are two primary differences: who they represent and who they work for.

Insurance agents typically work for a particular company (or in the case of an independent agent, they can represent several companies), and they represent that company or companies when selling you an insurance policy. Watch this video to see an example of what an Allstate insurance agent does.

By contrast, as you already know, insurance brokers do not work for a particular insurance company or companies and they represent you as the customer when you’re shopping for a policy.

What are health insurance brokers?

Health insurance brokers are like other insurance brokers in that they represent the consumer and are able to offer you advice on exactly what kind of coverage and policy you need given your circumstances.

And like other types of brokers, health insurance brokers make money primarily based on a commission for each policy they sell. They can also earn fees, as we discussed earlier.

What are medical insurance brokers?

A medical insurance broker is simply another term for a health insurance broker. They work with you as the customer to find the best health/medical insurance plan for your needs.

Now that to know what insurance brokers are, use your ZIP code to get a free quote on car insurance, so you can see how much you’ll save buying online vs with an insurance broker.

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