Attorney at Law

What is an Insurance Broker?

An insurance broker is a professional who acts as an intermediary between a consumer and an insurance company. An insurance broker works closely with the consumer to find the right policy for their specific needs and circumstances. In contrast to insurance agents, brokers represent consumers and therefore cannot sell insurance.

Brokers facilitate sales of all types of insurance including life insurance, homeowners insurance and health insurance.

Key Takeaways

  • The role of an insurance broker is to assist consumers in finding and purchasing the right policy for their needs.
  • Insurance brokers represent the consumer while insurance agents represent one or more insurance companies.
  • According to the United States Government Accountability Office, insurance brokers must be licensed by the state.

The Role of Insurance Brokers

Due to their extensive knowledge of the industry, brokers are able to guide their customers to the right policy based on their risk factors and financial circumstances. Since they represent the consumer and not the company, they do not have the legal right to act on behalf of an insurance company’s behalf. They can, however, research insurance policies for the consumer and present them.

Brokers typically work for commissions, and they may operate independently or for a company with multiple brokers. Commissions are calculated as a percentage of the policy's total annual premium. These commissions generally range between 5-15% based on the type of insurance policy placed and the volume of business an agent has with the insurance carrier. In addition to charging commissions, some brokers may also charge broker fees. It should be noted that the fees must be disclosed to the buyer beforehand and comply with state laws. For instance, some states have imposed a maximum fee that an insurance broker is allowed to charge.

Why You Should Use an Insurance Broker

Although you could purchase an insurance policy on your own, there are many advantages to hiring an insurance broker to represent you in your search. Here are a few of the top benefits:

  • Brokers will shop around for the best insurance policy for your needs, which saves you plenty of time and stress.
  • Through their close relationship with insurers, brokers can ensure you are getting the best price for your insurance policy.
  • As market conditions continue to fluctuate, brokers will make sure you are maintaining valuable and sufficient coverage throughout the benefit period.
  • In many cases, brokers will be able to assist in settling a claim quickly and efficiently.

Bottom Line

When it comes to insurance policies, it is usually recommended to seek the expertise of an experienced insurance broker. Not only will an insurance broker help you save time, but he or she will also assist you in deciding exactly how much coverage you need so that you do not over purchase or not buy enough protection. In spite of commission fees, you can actually save money over the long run by hiring an insurance broker.

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