Buying insurance is tricky. You don’t want to pay for coverage you don’t need, but you definitely don’t want to leave yourself underinsured and exposed, either. If you don’t have the time (or, frankly, the desire) to slog through all of your insurance options to find the precise coverage level you need at the best price, you can turn to an insurance broker.
Brokers work on your behalf. You’re their top priority, rather than any insurance company. So if you’ve been looking for an ally in the insurance world, a broker could be just the thing. But they might charge a fee — and you need to decide if it’s worth it.
What is an insurance broker?
Here’s a simple insurance broker definition: a broker is an insurance professional who represents the buyer (you), rather than the insurance company, and earns money when you choose an insurance policy they recommend.
So what does an insurance broker do, exactly? They sit down with you to understand your insurance needs. Then, they use their industry experience and connections to compare various policies from various insurers to find the best protection for you at the best price.
At that point, they present policy options to you. It’s important to know that an insurance broker can’t bind coverage for you. That means you’ll need to work with the insurance company they recommend to actually put your policy in place. Still, your broker can do all of the legwork for you — and can help you understand key differences between coverage options so you can feel informed as you choose your policy.
Insurance brokers vs. insurance agents
To best understand brokers, it’s helpful to differentiate an insurance broker vs. agent. While the broker represents you, an insurance agent represents the insurance company.
There are two different kinds of insurance agents: captive agents and independent agents. Captive agents work exclusively with one insurer (e.g., a Geico agent or State Farm agent). Independent insurance agents work with multiple insurers, meaning they can help you shop policies from all the insurance providers they represent. But at the end of the day, independent agents are tied to the providers with which they work — and getting sales for them is their top priority.
When should I use an insurance broker?
In some cases, brokers charge a fee (more on that next). That said, in many cases, the broker can find better policies for cheaper prices, ultimately helping you save money overall.
With a fee on the table, you probably don’t want (or need) to use a broker if your insurance needs are relatively simple. You can probably get quotes online or work with an agent because your policy options — and the price of those policies — are going to be pretty straightforward.
But as your needs get more complex, looping in an insurance pro who’s on your side can help you find the protection you need at a good price.
Some examples of more complex insurance scenarios include:
- Owning a business
- Owning or renting multiple residences
- Owning or leasing multiple cars
- Excess liability, like if you own a dog from an aggressive breed or a pool
All this said, even if your coverage needs are simple, you might want to use an insurance broker if you’re tired of feeling like you don’t really understand what you’re getting when you pay your insurance premiums. Or if you feel like you might be able to get a better policy but you don’t want to do the research yourself.
How does an insurance broker make money?
This is the kicker. In exchange for being your partner for your insurance needs, brokers need money. They can get paid in two ways:
Insurance companies love when brokers bring them business. So to say thanks, they often offer that broker a commission on the policy premium. You won’t need to pay this amount — it’s money that goes straight from the insurance company to your broker.
What does an insurance broker do if they want to make a little more? They can charge a fee for their services. Usually, these fees don’t get too crazy (think: $100 or less for standard insurance policies) – but it’s something to be informed about. Your broker should disclose any fee they charge to you.
Don’t be deterred by a fee, though. Do the math. If your broker saves you money every year by recommending better coverage for a better price, the fee essentially pays for itself.
Ultimately, how much do insurance brokers make? It depends on the fees and/or commissions they charge, and that usually depends on your state. That’s because many state legislatures cap broker fees and commissions in an effort to protect consumers like you. Brokers generally have to disclose their fees and commissions, too. So if you’re thinking about using an insurance broker, you can ask a few for their pricing structure to compare.
How else can I buy insurance?
If you want to skip the broker fee, you have a few other options for buying coverage:
- Going straight to the insurance company: Almost all large-scale insurance providers offer online quote forms. You can start the process there to compare policies and pricing. Then, you can follow the best company’s next steps (usually, an online form or a phone call) to buy a policy.
- Working with an independent insurance agent: This person will be able to compare policies from multiple insurance providers for you. Remember, though, that they represent those companies, not you. It’s up to you to protect your interests.
- Working with a captive insurance agent: If you know you want to work with a specific insurance provider (for example, if you already have a policy with them and want to bundle your new policy with it), you can work with one of their captive agents to buy coverage.
Frequently asked questions
Is it better to get insurance through a broker?
It depends on your needs. If you look purely at insurance broker vs. agent costs, you might pay more in fees with a broker. But you also get someone who’s committed to serving you, not the insurance company. Generally, as your insurance needs get more complex, hiring a broker — and paying their fee — makes more sense.
Will I save money by buying insurance through a broker?
Again, it depends. Insurance brokers should try to help you save money since their whole goal is getting you the best coverage for the best price. But if you already have pretty basic insurance, they might not be able to find enough savings for you to make up for their fee.
What information will an insurance broker need from me?
The same information as any insurance professional, including info on the thing you want to insure and details about your specifics. So if you’re looking for the best car insurance company, for example, the broker will ask about your car, annual mileage and driving history, along with things like where you park the vehicle and which coverages are important to you.
Working with a broker gives you the opportunity to ask questions and talk about any concerns you have, so take advantage of that as they’re gathering information from you.