What is an Insurance Broker?

While you can get the insurance coverage you need from both an insurance broker or an agent, they have a few key differences.

PolicyPals team

Published December 1st, 2020.

It’s easy to confuse an independent insurance agent with an insurance broker. Both work to get the most coverage for the lowest price on behalf of their clients. An independent agent sells insurance for a few companies, but a broker can access nearly every available insurance policy.

Key Takeaways

Why choose an insurance broker?

Your insurance broker works for you, not for the insurance company you choose. They comparison shop on behalf of their clients to find the best prices without sacrificing coverage.

A broker typically works with a large number of insurance companies. They may have a deeper understanding of a company’s strengths, so they can find insurers who specialize in offering the types of coverage you require.

Who needs an insurance broker?

Not everyone needs an insurance broker. 

It makes sense to approach a broker if you have complicated insurance needs, like a homeowner with a main residence, vacation home, and several vehicles. In that case, a broker may help you understand how best to structure your coverage, so you save money while getting the policies you need to protect your investments.

Business owners who have hard-to-insure risks like over-the-road hauling of hazardous materials or a delivery service spanning across several cities could benefit from the expertise and connections offered by insurance brokers: they can reach out to wholesale brokers to access insurers that write policies in your niche.

Is it more expensive to work with an insurance broker?

Like independent insurance agents, brokers work on commission, or sometimes a flat fee. They will get a commission from the insurance company once you purchase a policy with the insurer. The commission varies by insurer and type of policy and is usually a percentage of the policy premium.  Many insurance brokers receive a higher commission for new policies. Pay based on a commission structure could mean your broker will try to sell you more coverage each year.

Insurance brokers also have a financial interest in you keeping your policies active, so you can be certain that they will do their best to find insurance products fit your needs and that you will keep running in the long term.

The broker’s commission, like the insurance agent’s commission, is included in your insurance premium, so you will not have to pay extra. If you buy your insurance directly, you might pay the same price, the only difference is that the insurer doesn’t have to pay a commission.

Insurance Broker vs. Insurance Agent

An insurance agent represents the insurance company.

  • A captive agent represents a single company, they can give you quotes for various policies from their company.

  • An independent insurance agent represents many companies and can offer a number of quotes from different insurers.

An insurance broker represents the policy buyer, you.

  • A retail broker works directly with individuals and businesses that want to purchase insurance.

  • A wholesale broker works with insurance companies and retail brokers to help secure coverage in certain markets that involve a higher-than-normal level of risk for insurers.

Whether you choose an insurance agent or an insurance broker depends on the complexity of your insurance needs. If you own a business or have multiple properties that require insurance, you may benefit from the advantages provided by a broker.