What Is the Difference Between an Insurance Agent and an Insurance Broker?

Both insurance brokers and agents can help you obtain insurance but a broker will primarily represent you in the insurance shopping process, while an agent will primarily represent the insurance company you buy coverage from. As a result, brokers may be better suited to help you compare policies from multiple insurers, while agents may be able to give you more in-depth information about a single company’s products for free.

Continue reading for more insurance broker vs. agent comparisons including when you may want to use one or the other and what some of the characteristics of a good broker or agent are.

Key Takeaways Insurance brokers represent prospective buyers in the insurance shopping experience, while agents represent insurance companies. Agents generally provide their services to consumers at no charge and work solely on commission but brokers may work on commission and charge fees to consumers. You may need a broker if you want help comparing quotes from multiple insurance carriers or have complicated coverage needs, while you might opt for an agent if you have more straightforward coverage needs and prioritize receiving support for free. Many insurance companies allow you to purchase coverage directly from them, meaning you don’t always have to go through an agent or broker to obtain insurance.

What Is an Insurance Broker?

A broker is an insurance salesperson who represents the insurance shopper. While they may not be experts on any one insurance carrier’s offerings, brokers specialize in helping customers shop around by comparing quotes from multiple insurance providers.

Even though a broker can submit an application to an insurance company on your behalf, they won’t be able to guarantee that you will receive coverage before your application is approved since the broker basically works for you rather than the insurance company.

What Types of Insurance Brokers Are There?

There are two main types of insurance brokers: retail and wholesale brokers. The most common type of insurance broker is a retail broker and their job is to act as a liaison between you and major insurance companies by collecting multiple quotes to figure out which insurer can provide you with the most affordable policy or the policy that provides the most in-depth coverage.^[1]

Meanwhile, wholesale brokers tend to handle more specialized cases involving complex coverage requirements. For example, a wholesale broker may be able to procure a nonstandard auto insurance or high-risk homeowners insurance policy for you or your retail broker.^[1]

Do I Have To Pay for an Insurance Broker?

Since they primarily serve you rather than insurers, brokers may directly charge you a fee for their services. Alternatively, your insurance company may take a percentage of your insurance premiums and give it to your broker as a commission payment. For example, health insurance brokers in the individual market throughout the United States receive an average of $15.16 per health plan member per month in broker fees and commissions.^[2]

When Should I Consider Using an Insurance Broker?

You should consider working with an insurance broker if your top priority is finding the best coverage available from all possible options. Since they aren’t restricted to working for any one insurance provider, a broker’s biggest concern should be finding a policy that best suits your needs regardless of what insurer offers it.

In addition, you may want to use a broker if you face unique risks and aren’t sure what the best type of coverage to address those risks is, especially if you are looking for commercial insurance, according to Samuel Greenes, an insurance broker and the founder and CEO of BLUE Insurance.

“We’re experts at tailoring policies to fit unusual scenarios versus just what’s cookie-cutter,” Greenes said in a message to SmartFinancial. “And we shop multiple markets to try securing creative solutions — not just what’s on our own shelf, so to speak.”

What Is an Insurance Agent?

An agent is an insurance salesperson who represents the insurance company. They may be an expert on the insurance products offered by one insurer or by a small handful of insurers but they cannot sell insurance policies from a carrier they don’t contract with or sell specific types of policies that they have not been contracted to sell.

Unlike brokers, agents are able to bind insurance policies for you. This means that you can give a down payment to your insurance agent to secure temporary coverage even if the insurance company has not yet finished underwriting your policy.^[1]

What Types of Insurance Agents Are There?

The two main types of insurance agents are independent agents and captive agents. Independent agents contract with and can sell policies from multiple different insurance companies. As a result, an independent agent may be able to help you compare quotes similar to an insurance broker.^[1]

Conversely, captive agents, also known as exclusive agents, can only sell policies from a single insurance company. While independent insurance agents are generally independent contractors, captive agents may either be independent contractors or employees of the companies they sell insurance for.^[3]

Do I Have To Pay for Using an Insurance Agent?

You can generally receive an insurance agent’s services for free. Captive agents may receive a salary, while independent agents generally work solely on commission. In either case, the insurance company pays the agent for the service of selling its policies, as opposed to you paying the agent for the service of helping you shop for insurance.

When Should I Consider an Insurance Agent?

Greenes recommends going through an independent agent for most “everyday personal insurance needs” including basic auto insurance, home insurance, renters insurance and life insurance. Agents may also be the preferable option if you already have one type of policy from a certain insurer and are interested in acquiring additional policies from the same insurer in order to benefit from a potential bundling discount.

Other situations in which you may benefit from working with an insurance agent include when you want help finding a policy without having to pay an upfront cost, when you want your coverage to take effect as quickly as possible and when you already have a certain insurance company or policy in mind and simply want the agent to do the work of securing the policy for you.

Since an agent’s primary concern may be making sales and earning commissions, they may be motivated to sell you a policy no matter what. Nevertheless, insurance agents generally have a fiduciary duty to provide you with accurate advice and should provide you with the coverage that best matches your requests within the scope of policies they can sell.^[4]

How Are Insurance Brokers and Insurance Agents Different?

See the below table for a direct overview of some of the major differences between insurance brokers and insurance agents.

	Brokers	Agents
Who they represent	Consumers	Insurance companies
Whether they can bind policies	Generally cannot bind policies	Generally can bind policies
Costs to consumers	May require consumers to pay fees	Generally don’t charge consumers
Specialty	Helping customers compare quotes from multiple insurers	Directing customers to the best available coverage from a specific insurer or group of insurers
How they are paid	May be paid by insurers and consumers	Typically paid exclusively by insurers

What To Look For in an Insurance Broker or Insurance Agent

No matter whether you opt for a broker or an agent to help you find insurance, you should look for someone who has the right licenses and other necessary credentials in your state along with experience dealing with the kinds of insurance coverage you need or the specific risks you face.

Consider asking people in your community for recommendations. For example, real estate agents may be able to help you get in touch with high-quality homeowners insurance agents or brokers in your area. In addition, if you decide to go with a broker, be sure to ask about the fees they charge up front so you will know whether their services can fit into your budget.

Can You Buy Insurance Without Insurance Brokers or Agents?

Many insurance companies allow you to buy coverage directly from them online, over the phone or in person rather than going through an outside broker or agent. In fact, direct sales are the most common type of sale for homeowners and auto insurance, while sales through insurance agents and brokers are more common for commercial insurance.^[5]

Additionally, you can get health insurance yourself by shopping on the federal Health Insurance Marketplace or your state’s equivalent health insurance exchange, although you can also engage an agent or broker to sign up for health insurance through the Marketplace on your behalf.