What Is a Car Insurance Broker?

secure Editorial Standards

SmartFinancial Offers Unbiased, Fact-based Information. Our fact-checked articles are intended to educate insurance shoppers so they can make the right buying decisions. Learn More

Shopping for auto insurance can be challenging if you require coverage that differs from a standard policy. For instance, you may need commercial auto insurance to cover your fleet if you're a business owner. A wealthy homeowner with several properties and vehicles may need a different policy that covers their assets.

If you have complex insurance needs, consider seeing an auto insurance broker.

If you have complex insurance needs, consider seeing an auto insurance broker. These professionals can help you find coverage that fits your goals. In this article, you'll learn about the benefits of working with an auto insurance broker.

What Is an Auto Insurance Broker?

Car insurance brokers are intermediaries between you and insurance companies. They use their professional knowledge coverages from different car insurance companies, then select the policy that best suits your needs. Brokers are not the same as agents.

Car insurance brokers are intermediaries between you and insurance companies.

There are several types of auto insurance brokers. They include:

Retail Brokers - These individuals work directly with customers to help them get insurance. They will work directly with an insurance carrier or wholesale broker to buy a specialized policy when someone has complicated insurance risks or needs.

Wholesale Brokers - These professionals don't have contact with the end-customer. These individuals include drivers, families or businesses. They offer specialized insurance policies to retail agents and brokers. They have expertise on complex risks.

Surplus-Line Brokers - These professionals work with wholesale brokers. They negotiate the insurance coverage for excess and surplus lines insurance, which cover risks that other insurance carriers won't. Surplus-line brokers cover:

  • New business ventures
  • Have higher liability limits than standard insurers
  • Requires coverage for a type of risk if you have a history of claims
  • Has complex or unique risks that standard insurers won't cover
  • Have a business with hazardous or unusual activities

What Are the Differences Between Captive and Independent Agents Versus Auto Insurance Brokers?

Drivers can buy car insurance from three types of insurance professionals.

Drivers can buy car insurance from an insurance professional in one of three ways in the insurance industry. These include:

  • Captive agents
  • Independent agents, and
  • Insurance brokers

Another way customers can shop for insurance is by using auto insurance comparison websites, like SmartFinancial. Using this method, customers can comparison shop coverage from different insurance companies and find the best policies. They'll even be paired with a trustworthy agent or broker.

In upcoming sections, you'll learn how insurance brokers differ from captive and independent agents in the insurance world.

What Is a Captive Agent?

Captive insurance agents work as employees or representatives of a single insurance company. These agents only sell policies from that single carrier.

Captive agents don't charge fees: the insurance companies pay them using base salaries or commissions. Since captive agents work for one car insurance company, they'll have the expertise to tell you about different products within the insurer's line that can benefit you.

These agents don't comparison shop with other insurance companies to give you the lowest prices. These agents don't provide information about other car insurance companies or their policies.

What Is an Independent Insurance Agent?

Independent agents are professionals who work with multiple insurers. These agents give drivers an expanded choice of auto insurance policies; however, they still work for insurance companies. They simply have contracts with several insurance companies. These agents can bind a policy or provide temporary coverage before an insurer finalizes the policyholder's coverage.

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

Insurance brokers share some similarities with independent agents. Brokers solicit insurance quotes from different companies to get you the best coverage at the lowest rates.

Although brokers work with multiple companies, they work for their customers, rather than the insurer. These professionals have extensive knowledge about buying car insurance coverage, since they work with several brands instead of a specific company. They also offer a broad range of insurance product lines from various brands.

Insurance agents can finalize your insurance policy after you purchase one through them. They can give you access to temporary coverage while the insurance company processes your forms.

On the other hand, brokers must work through carriers or insurance carriers to complete the sales process. Some brokers can complete these sales if they have contracts with certain insurance companies.

Another difference between insurance agents and brokers is the pricing. Agents don't charge their fees to help clients find coverage. Insurance brokers sometimes charge fees before they'll work with a customer. However, car insurance brokers can find cheap car insurance rates for their customers in complicated situations that can help them save money in the end.

Start Comparing Rates from Several Companies

How Does a Car Insurance Broker Get Paid?

Car insurance brokers receive their income primarily through fees and commissions. In this section, you'll learn the differences between commission-based brokers and fee-based ones.

The Commission-Based Broker

When a broker works on commission, you don't pay charges. The insurance broker receives a commission from the carrier when someone purchases a policy from the insurer.

These fees usually don't impact the cost of insurance. Commissions range from two to eight percent of your auto insurance premium, depending on your state. Brokers include their fees in the policy's total cost, which is a percentage of the price. Their commission will vary depending on the insurance carrier, contract, and coverage.

Most brokers receive significant commissions when a customer purchases a new policy. They can receive up to a 100 percent commission during the first year. Brokers receive a lower commission for policy renewals.

Some insurance companies require brokers to repay their commission if someone cancels their policy within the first year. As a result, these professionals have an extra financial incentive to ensure that you're happy with your policy.

In theory, brokers are independent of insurance companies and won't show bias to any carriers. This situation is not always the case. Some insurance companies use monetary bonuses or gifts to persuade brokers to send them business. Those who bring in the most clients may receive the highest financial incentives from carriers.

The Fee-Based Broker

Some brokers charge a fee for their services rather than work off of commissions. Fee-based advisors receive their payments through fees that you give them for their work. Once you pay the fees upfront, the insurance advisor will speak with you about your background and other demographics to determine which coverage is best for you.

Since they don't receive commissions, an insurance carrier is less likely to influence their advice. The broker fee is usually a few dollars.

When Should You Work with an Insurance Broker?

Insurance brokers work with customers that have unusual driving histories or complex coverage needs. Most people won't have to work with a broker to purchase their car insurance; however, they can assist you to find the insurance policies that are right for your needs. Insurance brokers can help you find coverage in the following situations:

  • You own a business
  • You own multiple homes, properties or vehicles
  • You need multiple lines of coverage (life insurance, homeowners insurance, auto insurance)
  • You require a policy that matches your complex driving history or background
  • You require an expert to guide you through a policy's exclusions and limits
  • You want someone to shop for insurance for you and compare coverage from different providers
  • You require excess coverage (for a pool or an aggressive pet breed)

These professionals usually work to solve complicated coverage situations for drivers. For instance, if you own a restaurant chain with several catering vans, you may need a commercial auto insurance plan to cover drivers in different situations.

During a consultation, the insurance broker will sit down with you and ask you to submit details about your driving history, demographics and other personal data. This information will help them to search for a policy that will match their current needs.

Five Benefits of Using an Insurance Broker

Are you still deciding whether you want to work with an insurance broker to help you shop for insurance? There are four benefits they provide over captive and independent insurance agents.

They are independent of the insurance company

Captive agents will only sell you insurance policies from a particular insurance company. For instance, if an agent works for Allstate, the insurance agent will sell you policies from that insurance company.

They save you time

An insurance broker can shop from different insurance companies to help find an auto insurance policy. You don't have to waste time comparing insurance quotes or figuring out coverage since the broker can complete this process on your behalf. They can also help you to identify the best options for your situation quickly.

Brokers are knowledgeable about different insurance products

An insurance broker will understand the advantages and disadvantages of various policies and insurance companies. They can select the right coverage for your needs.

Captive agents only know about insurance products from a single insurance company. For instance, if a captive agent works with State Farm, the professional will only know about coverage from that carrier. Brokers work with multiple insurance companies.

For instance, they may offer policies from Allstate, State Farm, Farmers and other insurers. They'll provide information about plans from different carriers to help you make a more educated decision about the policy you select.

They help you find better coverage when your needs change

Most people's needs change, and the coverage they purchased may no longer be right for them. For instance, you may need a new policy if you've recently gotten married, gotten a traffic violation, or added a new driver to your policy. Depending on the situation, your rates can decrease or increase significantly.

An independent agent may recommend another insurer that can provide you with a lower premium if your current insurance company can't provide these options at a lower cost. They will also review the coverage you receive and help you find better choices.

You'll receive expert advice about several lines

Retail auto insurance brokers can give you the benefits and advantages of specific companies. They should be able to understand the subtle differences between insurance policies and carriers. These professionals will also work with wholesale brokers to find specialized policies for people who have complex needs.

Start Comparing Rates from Several Companies

Disadvantages of Working with a Broker

Although an auto insurance broker can help people with complex coverage needs, there are several disadvantages to working with them.

You may have to pay them for their services

Some auto insurance brokers will require you to pay a fee. Although they don't work with one carrier, they can encourage you to purchase a more expensive plan. They take about 15 – 20 percent of their customer's insurance rates that the carrier pays.

You may not need to work with a broker

Unless you are a driver with have complex insurance needs, you don't need to work with an insurance broker. If you need to compare coverages, you don't need to pay an auto insurance broker.

Instead, you can shop online using a free online insurance comparison engine like SmartFinancial. These tools can provide you with free quotes from different insurance companies without leaving your home. Just enter your zip code on this page to get started.

Four Tips to Select a Car Insurance Broker

Do you need a broker to help find a policy that's right for your business? It's best to do some research on your broker before working with them.

1. Ask for referrals and check their references

If you don't know which insurance broker to select, ask for referrals from other people or businesses who have worked with one. You can also check online from organizations like Yelp Reviews or the Better Business Bureau to view which ones have a positive history working with clients.

You can also check with your state's insurance regulator to learn whether the broker you select has a valid license to work within the state. Next, speak with the insurance broker to learn more about their track record.

2. Consider your coverage options

Before you schedule an appointment with your broker, find out which insurance options you'll need. Learn more about your state's minimum auto insurance coverage for drivers. If you run a business, find out the amount of coverage you'll need to protect your property and insure your vehicles. This information will help you avoid purchasing coverage that you don't need for your business.

3. Find out about Your broker's specialty experience

Your broker may specialize in niche industries that a general insurance broker would not. For instance, one broker could specialize in protecting commercial properties, like restaurants or shops. When speaking with a broker, ask them if they have experience in buying car insurance for similar specialty businesses.

4. Pick a broker that fits well with your needs

Affordability isn't the only quality you consider when working with a broker. When selecting a broker, find ones who are pleasant, professional and competent. Also, choose a reputable insurance broker who is familiar with the different coverages available. This professional should also give you personalized advice that matches your situation.

Compare Auto Insurance Rates for Free

Do you need to find affordable auto insurance for your vehicle or business? You can find affordable coverage using auto insurance comparison websites, like SmartFinancial. These tools do all the legwork for you. They save time by comparing coverages from multiple insurance carriers at the lowest price.

We'll provide you with free car insurance quotes from carriers within your area that can provide coverage. You can also connect to a local agent that can help you find coverage It's the intelligent way to shop for insurance coverage.

Get a Free Auto Insurance Quote Online Now.