What Is an Insurance Broker—and Do You Need One? (2024)

Shopping for insurance can be both confusing and tedious—working with an insurance broker could offer some ease.

“Insurance is something that most of us need, but it isn’t something people like to talk about or spend a lot of time on,” says Scott Holeman, a spokesperson for the Insurance Information Institute, which provides education and resources to the insurance industry and consumers.

That’s understandable. Finding an affordable insurance policy from a reputable company takes effort. One survey found that many shoppers spent from 30 minutes to two hours comparing insurance quotes. For people with high-value assets, such as cars, real estate or a business, finding the right policies can become especially tricky—not to mention doing an annual check-in to ensure coverage is still adequate.

That’s where insurance brokers may come in. They help you determine how much insurance coverage you need and do the legwork of vetting insurance carriers, requesting quotes and comparing policies to get you the right amount of coverage for the lowest price. If you need to change your coverage because you expanded your business, started a new job or purchased a new car or home, they can pull new quotes quickly.

Keep reading to learn more about what insurance brokers do, whether you need one and how to find one.

What is an insurance broker and what do they do?

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.

Once you make an insurance selection, a broker will help you through the application process, collecting paperwork and working with an agent there to complete your policy.

Oftentimes a broker will remain your point of contact even after the policy is in place. They can help you file a claim or update your coverages. If your premium increases, they may be able to find you a cheaper policy elsewhere.

Many insurance brokers specialize in what is known collectively as property and casualty insurance, which includes car insurance, homeowners insurance, travel insurance and business insurance. These policies help replace your car, personal belongings or other property in the event of a disaster or accident, and pay for another person’s medical expenses or repairs if you’re liable.

Other brokers can help you find insurance policies to protect your estate or income, such as life insurance, disability insurance and long-term-care insurance. If you’re not enrolled in a health insurance plan through an employer, you may want to work with a health insurance broker to find a healthcare marketplace plan.

Online brokers such as Policygenius or The Zebra offer comparison shopping for auto, home, life and other common insurance policies without the individualized advice. “A lot of younger people want to buy online and don’t want to talk to anybody in particular. It depends on what your comfort level is and what kind of touchpoint you want to have,” Holeman says.

Online brokers run your profile through an algorithm and collect quotes from insurance companies, often within minutes. They typically have a team of (human) brokers available to answer questions about your coverage options, but you don’t work with a broker from the start.

Insurance broker vs. insurance agent

Insurance brokers and insurance agents are licensed by the insurance authority in the states where they do business. The primary difference between a broker and an agent is who they work for. In general, brokers have a duty to the consumer, rather than an insurance company, although in some states it’s an implied duty rather than a legal one.

• Insurance brokers help people shop for and choose insurance policies but they don’t work directly for any company.
• Independent-insurance agents help people find the best policy for their needs too, but their pool of options may be more limited than a broker. That’s because they can only pull quotes from companies they’re contracted to represent.
• Captive insurance agents don’t help people comparison shop because they only sell products from one insurance company.

“A broker or an independent agent has the ability to show you multiple carriers and will give you choices. That’s the bottom line,” says Eleanor Johnson, a principal at Highland Capital Brokerage, an insurance planning firm based in Birmingham, Ala.

How insurance brokers get paid

Typically, consumers don’t pay insurance brokers or agents directly. Instead, both brokers and independent agents earn a commission from insurance companies in return for bringing in customers.

The company you sign a policy with will pay the broker, usually a flat fee or a percentage or your premiums for the first year or longer, depending on the type of insurance you buy and the structure of the policy.

Importantly, the quote you see for a policy includes a broker’s commission, so you don’t have to worry about hidden costs popping up. “Those fees are baked into the product actuarially,” Johnson says.

This doesn’t necessarily mean you pay more to use a broker than you would if you find a policy on your own. In that case the insurance company keeps your full premium instead of paying out a commission to a broker. However, in rare instances, brokers will charge shoppers a one-time fee for their advice.

Each state has laws about what fee information insurance professionals need to disclose to consumers. It’s always smart to ask up front about how your broker is paid, even if you’re not the one handing over the money. Some insurance carriers reward brokers with bonuses for bringing in a high volume of customers, which can incentivize the brokers to favor those companies.

Do I need an insurance broker?

If you need several insurance policies, you may benefit from working with an insurance broker. A broker can help you devise a plan that protects all of your assets in the most cost-effective way, Holeman says.

With life insurance, for example, Johnson says a lot of factors influence the right policy for you, from age to medical history to whether you engage in risky activities. Life insurance carriers evaluate these inputs differently to price their policies and a broker can get quotes from a swath of companies to give you options.

You may also want to use an insurance broker if you need affordable coverage for your car or home quickly. As insurance carriers are jacking up rates, declining to renew some policies and even not issuing new policies in high-risk states, it can be difficult to shop for insurance right now. Brokers are tuned in to the insurance marketplace and can evaluate all of your available options to keep costs down and avoid a lapse in coverage.

Speed is the primary benefit of working with a broker, says Sean Lovison, a New Jersey-based certified financial planner. It’s especially helpful when you’re looking to update a policy or switch carriers and a broker has your information on file. “That is one of the major advantages of using a broker, because when you’re on your own and you have to build these quotes, it is a huge pain in the butt to do,” he adds.

If you decide to go it alone, make sure you’re getting the best rate possible. Reach out to at least three companies for quotes and compare.

How to find an insurance broker

Many financial advisors have at least one trusted insurance broker they refer clients to. Lovison prefers brokers who pull quotes from at least 20 different insurance companies and who show their work.

“There are some brokers out there where it’s like the black box—you give your information and they’re just going to say, this is the best policy,” Lovison says. Ask for side-by-side comparisons to confirm you’re getting the best rate for your coverage selections, he urges.

You can also start looking by asking friends and family for recommendations. “That’s, a lot of times, a great way to find somebody who’s the right fit for you,” Holeman says. “See what it’s been like for someone else.”

Use the National Association of Insurance Commissioners’ lookup tool to verify an agent or broker’s license (note: not every state database is available).

Here are a few important questions to keep in mind as you vet insurance brokers:

• Are you a broker, an independent agent or a captive agent?
• What type of insurance do you specialize in?
• How many insurance carriers do you pull quotes from?
• How many quotes will I get to see?
• How do you evaluate policies?
• How do you get paid?
• Do you have a fiduciary duty (an obligation to act in the best interest of the client)?
• Will I have to pay a fee for your services?
• If I purchase insurance through your recommendation, who will be my point of contact when my policy is active?

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