Auto Insurance Brokers: Should You Use One?

Finding the right insurance policy for your needs and budget isn’t always easy, and you may decide you want assistance from a professional. Many consumers rely on insurance brokers to offer valuable insight into the insurance industry and connect them with the right coverage at the right price.

Some buyers may find they don’t need a broker. After all, many online resources make it easy to find relevant information about auto coverage options. Plus, brokers often charge a fee for their services, which might not work for drivers on a budget.^[1]

Here’s what you should know about insurance brokers and the pros and cons of working with them.

What does an insurance broker do?

Insurance brokers help drivers understand their needs and budgets and help them sort through the many insurance coverage options to find a policy that works for them.

Unlike some insurance agents, insurance brokers don’t work on behalf of one single insurance company. This means brokers are unbiased and aren’t beholden to a specific insurer.

But insurance brokers can’t issue you a policy. Instead, they merely direct you to representatives at the company who can handle your purchase.

Insurance brokers can be helpful in the following situations:

• You’re buying an auto policy for the first time. Having someone help you understand the many different options across the insurance landscape can make the process easier.

• You need multiple coverages. If you need a few different insurance policies, including car insurance, homeowners insurance, and life insurance, you may want someone to connect you with budget-friendly bundling options.

• Your insurance needs are complex. A broker can help you find additional coverages like recreational vehicle (RV) insurance, boat insurance, or commercial vehicle insurance.

Why comparing car insurance rates gets you cheaper car insurance

Car insurance is a dynamic, complex industry. Insurance rates can vary significantly by insurance company and driver profiles. Several main factors can affect your insurance premiums, including your age, gender, marital status, type of vehicle, ZIP code, driving record, credit history, and more.^[2]

Comparing quotes from multiple insurance companies can help you find a company that meets your budget. You might be able to discover a company that calculates rates in a way that’s favorable to your personal background. For example, certain insurers might offer lower rates for drivers in your age group.

Many online quote-comparison tools make it easier than ever to quickly receive quotes from multiple insurers. Insurance experts recommend accessing quotes from several insurance companies before choosing a policy.^[3]

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How auto insurance brokers get paid

Insurance brokers don’t work directly for insurance companies, which means insurance companies only pay them when they bring the company business. This helps brokers present unbiased information and advice.

While the specifics might vary by state, insurance brokers generally make money through commissions, fees, or some combination of the two.

Here’s how commission and broker fees work for brokers.

1. Commission

Insurance companies dedicate part of their budget to commissions, which insurers pay to brokers who bring the company business. The size of these commissions can depend on various factors. Some states, like New York, don’t set specific commission amounts and instead leave that decision to the insurer and broker.^[4]

2. Broker fees

Most auto insurance brokers charge a fee for their services. The size of this fee can vary based on the insurance agency you’re working with and the level of service you require. They may charge you a flat fee, an hourly rate, or a percentage of the price of your overall coverage package.

State regulations may affect how much a broker charges. For instance, New York law doesn’t establish a maximum fee for insurance broker services. State law says the fee must be “reasonable,” and both parties must agree on it initially.^[5]

Pros and cons of using a car insurance broker 

You might be on the fence about using a car insurance broker. Here are some pros and cons to consider as you mull over this decision.

Are auto insurance brokers worth it? 

If you’re looking for an insurance policy, you should first evaluate your personal insurance needs and budget before deciding whether to use a broker.

Drivers with complex insurance needs and minimal knowledge of their local insurance market might find it worthwhile to work with a broker. This broker can help them better understand their region’s insurance landscape and make the right choice when it comes to coverage.

Meanwhile, drivers looking for the cheapest policy might benefit from using a free quote-comparison tool instead. While insurance brokers can help you compare rates and find the best deal, broker fees may offset these savings.

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Auto agents vs. brokers: What’s the difference?

It’s important to understand the difference between an auto insurance agent and a car insurance broker.

First, captive insurance agents work on behalf of an insurance company. They can only provide information about the policies of the specific insurer they work with. Agent-driven service is more about looking at your situation and finding a policy from the specific company they work for. It’s also important to note that an agent can earn a salary, commission, or both, depending on how the company provides compensation.

A car insurance broker, on the other hand, provides expert advice about different policies from various insurers without ties to a single company. They can take into account your unique situation and find a policy that’s more likely to meet your needs in terms of insurance premiums and coverage.

But unlike an agent, a broker can’t actually issue you a policy. Instead, they’ll need to work through an agent to get your policy once they help you find your best choice from a variety of car insurance companies.

A broker usually receives a commission from the company once you’ve chosen a policy. Sometimes, though, you might need to pay an extra cost in the form of a broker fee, so it’s important to understand all your costs up front.

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