Skip to Main Content

What Is an Insurance Broker and Who Needs One?

Cavemen, geckos, mayhem, Flo, Jake—when it comes to buying insurance it seems like there are as many mascots as there are insurance companies. It’s a lot! But really, more than a gimmick, you’re looking for quality, affordable insurance. So where do you go to get that?  A lizard may not be your best bet, so let’s look at what an insurance broker is and if you need one.

What Is an Insurance Broker?

An insurance broker is the go-between between you and insurance companies. They play the middleman for everything from health and auto policies to life insurance, homeowner’s insurance, and more. When you work with an insurance broker, their loyalty is to you, not the insurance companies. Their job is to find you the best policy and rates for your situation.

Insurance brokers can’t actually sell you insurance though. Again, they’re the in-between person who works to get you better coverage than if you were to go out into the marketplace on your own. So when you land on a policy that you like with a broker, they’ll work with a binder—someone who can sell the policy, usually an insurance agent—to get the policy over the finish line.

What Is an Insurance Agent?

An insurance agent helps customers find and buy insurance policies. Unlike brokers, they work for one or more insurers, not you. And independent agents can also sell you the policies they suggest. Within the world of insurance agents, there are captive insurance agents and independent insurance agents. Let’s look at what makes them different from each other and from insurance brokers.

Captive Insurance Agent

It’s kind of a scary name, but a captive insurance agent is someone who only works for one insurer. That means they only try to sell you that insurer’s coverage, not a range of policy options from multiple companies. Captive agents usually work on salary plus commission, meaning they get a percentage of each policy they sell. A drawback to working with a captive agent is that you might not get the very best policy for you if that company doesn’t offer it.

Independent Insurance Agent

Independent insurance agents, on the other hand, may be retained by multiple insurance companies, which means they can sell any of those companies’ policies to you. If you work with an independent insurance agent, remember that you’re only getting access to policies from the companies they work with. Since this type of agent works with multiple insurers, they work on commission only and aren’t an employee of any of the companies they work with.

Pros and Cons of Independent Insurance Agents vs. Brokers

Now let’s narrow our focus down to just independent insurance agents vs. brokers. Each bring their own set of strengths to the table as well as some possible drawbacks.

Connect with an insurance pro in your area today and save more. 

Pros of Independent Insurance Agents

  • Work with multiple insurers to find and sell you a policy
  • Have in-depth knowledge about the plans and policies they represent
  • Aren’t tied to any one insurance company

Cons of Independent Insurance Agents

  • The insurance companies are their customer, not you
  • Don’t have access to the full range of policies that could benefit you
  • Work on commission, so it might be more important to them to sell you anything rather than the right thing

Pros of Insurance Brokers

  • Work for you, not the insurance companies
  • Work on commission, so expect great customer service
  • Have access to a broad range of insurers and policies

Cons of Insurance Brokers

  • Can’t actually sell you coverage and will have to work with a binder to complete the policy
  • May not have in-depth knowledge about all the available insurance products
  • Charge brokers’ fees

How Insurance Brokers Make Money

We’ve talked a little about how insurance brokers make money, but let’s explore the topic a little deeper. Remember, insurance brokers work for you. You’re their customer, not the insurance companies. While they can’t sell you your chosen policy (they’ll hand it over to an agent to complete the sale), they do have access to a much broader range of options than agents tied to only one or a few insurance companies.

Insurance brokers make money in two ways: commissions and brokers’ fees. For every policy they sell, they receive a commission from the insurance company you decided to go with. The commission is typically a percentage of the policy’s premium, or price tag. The commission is already included in the price of the policy. You’re not being charged extra to cover the insurance company’s expense.

The other way insurance brokers make money is through brokers’ fees. That’s where you come in. It’s kind of like a finders’ fee. They found you a great policy, and for doing that, you pay a fee. But before you run away screaming, these fees are usually pretty low—like under $100. And the savings you could be getting on your premium could easily make up the difference.

Should You Use an Insurance Broker?

Insurance brokers are a great resource for getting access to a broad range of policies and rates across multiple types of insurance. They save you the work of hunting down every type of coverage you need and instead present you with the best of the best. Since you’re their customer, they’re motivated to work hard for you, find you the best policies, and earn your long-term business.

The Right Car Insurance Policy for You

If it’s time to shop for insurance or you just want to see if there’s a better deal out there than what you’ve got, remember that you don’t need to do it alone. In fact, our Endorsed Local Providers—that’s ELP, for short—include both insurance brokers and independent insurance agents. ELPs are people we trust to take excellent care of you. These are the folks we call when we’re shopping for insurance! Our insurance pros make your needs their number one priority. Get with one today so you can save money, get better coverage, and go full steam ahead toward reaching your money goals!   

Find an insurance pro in your area today!

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

Do You Have the Right Coverage? 

Do You Have the Right Coverage? 

Find out with our free 5-Minute Coverage Checkup!
Take the Coverage Checkup

Do You Have the Right Coverage?  

Find out with our free 5-Minute Coverage Checkup!
Take the Coverage Checkup