Guide to Auto Insurance Brokers

First, let’s define what an insurance broker is.

What Is a Car Insurance Broker?

A car insurance broker is someone who acts as a middleman between the customer and insurance companies. They get car insurance quotes from different companies, compare the terms and rates, and then present their findings to the customer to help them make an informed decision.

Types of Car Insurance Brokers

While you’re most likely work with a retail broker, there are three types of brokers:

• Retail brokers: Retail brokers work with buyers directly, soliciting policies from many different auto insurance companies.
• Wholesale brokers: Wholesale brokers are the middlemen between retail brokers and auto insurance companies to help them find more specialized policies, like a high-limit commercial policy. By definition, you won’t work with a wholesale broker as a regular auto insurance customer.
• Surplus-line brokers: Finally, surplus-line brokers are the middlemen between wholesale brokers and surplus-line and excess insurance carriers. They look for policies with complex coverages and high limits, as well as those that cover new ventures or dangerous activities like long-haul trucking. Similar to wholesale brokers, you’ll never work with a surplus-line broker to buy personal auto insurance.¹

Who Pays Car Insurance Brokers?

Brokers make money in two ways:

• Commissions: When you buy an insurance policy, the broker will receive a percentage of the premium. Companies pay brokers’ commissions, not customers.
• Fees: Some brokers charge broker fees on top of the commissions. In contrast to commissions, customers pay broker fees, not companies.

While it may make sense to use an auto insurance broker, an agent might be a better choice for some people. Let’s break down the advantages and disadvantages of using a broker versus an agent.

You do not need a broker to buy car insurance; rather, you can use an agent or buy from a car insurance carrier directly either over the phone or online. But if you’ve decided to use a broker to buy your insurance, keep reading below to learn how to pick one.

Thanks to the internet, you can find a reliable auto insurance broker in no time. Here’s how:

1. Do your research. Research brokers in your area by reading customers’ reviews on Yelp or Google. Also, check the Better Business Bureau for ratings and customer complaints.²
2. Verify credentials. Before you contact them, verify the broker’s credentials with your state’s insurance department. See below for the contact information.

3. Hire someone: Once you’ve verified that your insurance broker has good reviews and is accredited, contact them and set up an appointment. From there, they can help you find the right policy for you.³

What does an insurance agent do, and how does it differ from what brokers do? See the major similarities and differences between agents and brokers below.

Key Similarities

• Help you find insurance: Both agents and brokers help you find auto insurance. Captive agents work for one company, while independent agents work with multiple carriers, similar to brokers.
• Advise you: Both agents and brokers are experts on auto insurance and can help you find the best policy for your vehicle.
• Make commissions: Both agents and brokers earn commissions when policies are underwritten. The companies pay these commissions at no cost to you, the customer.

Key Differences

• Whom they work for: While agents work for insurance carriers directly, brokers work for consumers.
• Which carriers they represent: Agents can present quotes only from insurance providers they’re associated with, while brokers can present quotes from all carriers. That means that you’ll get a wider range of choices through a broker than through an agent.
• Broker’s fees: Only brokers charge fees, while agents are paid commissions only. That means that you may have to pay for a broker, while agents are always free to the customer.
• Completing vs. facilitating transactions: Only agents can actually put policies in force; brokers merely act as middlemen.⁴
• Customer service: With an agent, even after you’ve purchased your policy, you’ll still work with them if you have any questions, need to file a claim, or need to add coverages. With a broker, you won’t work with them when the transaction is over, so the customer service post-sale might be limited. For higher average rates of claims satisfaction, look for agents over brokers.

Your broker, if you choose to go with one, has a huge effect on the auto insurance rates. Not limited to one or just a few companies, brokers can show you all of the options out there and help you decide. If you want to get the full scope of the entire market, brokers would be a better choice than agents. Learn more about the process of buying auto insurance in our detailed car insurance guide and our article on how to switch car insurance.

If you want to learn more about brokers specifically, keep reading our auto insurance frequently asked questions below. Brokers certainly make the process of buying auto insurance much easier, so if you’re okay with paying a fee of up to $250, they’re totally worth it.