Insurance Brokers: Do You Really Need One?

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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.

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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.

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