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My property insurance premium increased by about 50% this year. Something about inflation, the insurance company said.
Hellbent on making it my former insurance company, I found an online insurance broker and told them I wanted a new homeowners insurance policy with the same coverages and limits as the old one. All I cared about was getting a lower premium.
And get a lower premium I did — from my old insurance company. The broker apparently had a special relationship with my once and future property insurer, one that scored clients like me preferred pricing (we’re talking roughly 50% of what I’d been paying).
And that’s why I love insurance brokers now. I used to think they were just those annoying middlemen who increase prices, but if you understand what an insurance broker is and what they do, you may find that using one is the right choice for you too.
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What Is an Insurance Broker?
Insurance brokers are intermediaries between insurance buyers and insurance companies. They help people who need insurance shop for and purchase it. They get insurance policy quotes from several insurers and present the best options to the buyer.
But unlike the customer service rep you’d talk to if you call an insurance company directly, insurance brokers represent the interests of insurance buyers, not the insurance companies.
Insurance brokers can work independently or as part of a larger insurance brokerage. They’re licensed by state insurance departments and must meet continuing education requirements to maintain their licenses. An insurance broker must be licensed in every state they work in.
What Does an Insurance Broker Do?
Insurance brokers help people find and buy insurance coverage. Some focus on one type of insurance, such as health or car insurance, while others focus on several types of insurance.
Insurance brokers don’t sell insurance directly. Instead, they refer people to insurance companies. From there, insurance professionals known as “producers,” who work for the insurance company, help you complete your transaction.
Insurance brokers make money from broker fees, which insurance companies pay for successfully completed applications. Even though they act in your best interests, you don’t pay your insurance broker directly.
If you continue to work with an insurance broker after you purchase a policy with their help, they continue to represent your interests. However, not all insurance brokers help buyers once they become policyholders.
Insurance brokers have relationships with many different insurers. Because they send insurance companies a steady flow of new customers, they can often offer their buyers preferred pricing. As such, if you work with an insurance broker, you could get a lower premium than if you contact the insurer directly, though that’s not guaranteed.
Insurance brokers gather lots of personal information and ask many detailed questions before the handoff. That ensures they have everything they need to get an accurate quote from each insurer. It also reduces the chances of an unwelcome surprise like denial of coverage or a higher-than-expected premium.
Insurance brokers rely heavily on technology to do their jobs. They often use digital workflows to collect personal information and answers to screening questions. They almost certainly use electronic documents to deliver quotes and get insurance shoppers’ approval.
They may use artificial intelligence to qualify shoppers and help find the best policies. Some rely almost entirely on AI. For example, you can use the Affordable Care Act marketplace to find and buy health insurance without ever speaking to a human.
But even with the technology, it’s common to require at least one detailed conversation with a live insurance broker during the shopping process. They need lots of information about what you’re looking for and may need your verbal consent before talking to insurers on your behalf.
And even the most sophisticated AIs can’t always understand the nuances of the answers you give to screening questions. For example, knowledgeable humans can help you right-size your insurance requests. They’re more likely to catch it if you overestimate your property coverage needs in the automated quote generator.
Insurance Broker vs. Insurance Agent
An insurance broker is not an insurance agent.
Insurance brokers work for themselves or dedicated insurance brokerages. Either way, they typically have relationships with many insurance companies, even if they specialize in only one type of insurance. Insurance companies pay them, but they don’t work for insurance companies. By law, they must act in the best interests of insurance buyers, not insurance companies.
Insurance agents can also work for themselves or dedicated insurance agencies, and they also help insurance shoppers get coverage. They also earn commissions and other fees from successful insurance sales.
But that’s where the similarities end.
Insurance agents represent the interests of insurance companies, not buyers. A “captive agent,” also known as an exclusive agent, works with one insurance company, while independent agents can work with several insurance companies.
Both captive and independent insurance agents sell insurance policies themselves. When you work with an agent to buy insurance, there’s no handoff. They handle the entire process from start to finish.
Types of Insurance Brokers
Historically, there were two main types of insurance brokers: retail and commercial. Lately, a third (overlapping) type has come onto  the scene: digital insurance brokers.
Retail brokers work with individual insurance consumers. You can use a retail insurance broker to find:
Property insurance (homeowners and renters)
Some retail brokers offer more specialized types of individual insurance, such as coverage for jewelry and art.
Business Insurance Broker (Commercial Insurance Broker)
Commercial brokers work with businesses. Business insurance can be very specific (like hull insurance for cargo ships), and it’s imperative you have the right amount of coverage or you could lose your business if something goes wrong. So it’s a good idea to work with a broker even if you don’t feel like you need a broker for your personal insurance needs.
Some, such as HUB International, offer a wide range of coverage types for business owners, such as general liability, errors and omissions insurance, commercial auto insurance, and cyber insurance. Others focus on a smaller number of business insurance types, usually including general liability and commercial property coverage. They may focus on a specific industry, such as gas, oil, or marine.
Digital insurance brokers, like The Zebra and Insurance.com, rely heavily on artificial intelligence to lead you through the quote-generation process and present you with policy options that closely match your insurance needs.
Depending on the type of insurance you’re shopping for, you may be able to buy insurance from a digital broker without ever speaking to a human. In other cases, you answer the AI’s questions first, then speak with a live person to finalize your choice and complete the transaction.
Digital brokers are more common on the retail side, but they’re making inroads into commercial insurance as well.
Major Retail & Digital Insurance Specialties
All retail insurance brokers — both human-led and digital — focus on at least one type of insurance for consumers, such as health or life insurance. Some offer more than one. For example, a car insurance broker can also be a homeowners insurance broker. That doesn’t make them any less knowledgeable.
But you still need to ensure you’re working with a broker who understands the type of insurance you need. These are the most common insurance specialties for retail brokers.
Health insurance brokers help people find health insurance coverage.
The best-known health insurance brokerage is the Affordable Care Act marketplace, which connects shoppers with ACA-compliant health insurance plans. It’s followed closely by state-run health insurance exchanges, which also broker ACA-compliant plans.
Life insurance brokers specialize in life insurance policies. They help would-be policyholders find term life or permanent life insurance coverage. Many also broker related types of insurance, such as disability insurance and accidental death and dismemberment coverage.
The life insurance broker landscape is pretty fragmented. If you prefer a hands-on relationship, there are likely multiple local life insurance brokers selling policies in your home state. Digital brokers like Policygenius and Quotacy broker policies across the country if that’s your speed.
Car insurance brokers help folks buy competitively priced auto insurance.
Because it’s so common, the pricing advantage for auto insurance brokers isn’t always there. Emboldened by my successful property insurance broker experience, I decided to see if I could get a better deal on auto insurance while I was at it. No such luck — I ended up getting a better price buying directly from a new insurer.
If you want to work with a car insurance broker, your best bet is a national outfit like The Zebra. Bigger insurance brokers tend to have relationships with more insurance companies and better pricing power because they drive more customers to their partners.
Property insurance brokers help people buy homeowners insurance, renters insurance, and related types of coverage, like jewelry insurance and umbrella insurance. Some property insurance brokers specialize only in homeowners, renters, and umbrella coverage, while others cast wider nets.
If you need a property insurance broker, your best bet is to work with a national broker like Policygenius — one that’s likely to have the broadest possible range of insurer relationships and best pricing power.
Pros & Cons of Working With an Insurance Broker
It often makes sense to work with an insurance broker, but it’s not always a slam dunk. Sometimes, you’re just fine buying insurance on your own. To know which is best for you, it pays to be familiar with the pros and cons.
Pros of Working With an Insurance Broker
Insurance brokers can help you find a better price thanks to some advantages brokers have over agents or DIY shopping. For example:
They’re Insurance Experts. Insurance brokers — the humans who work for them, at least — know insurance inside and out. They’re licensed by every state they operate in and must complete many hours of continuing education to get relicensed. All specialize in specific types of insurance too.
They Often Get Preferred Pricing. Insurance brokers don’t guarantee better pricing, but it often works out that way. My experience is pretty typical — I got a way better deal from the same company by going through a broker that does a lot of business with them. It’s like buying in bulk or getting group pricing on employer-sponsored health insurance.
They Have Access to Policies and Coverage Types Not Offered to the General Public. Some insurance companies only sell through brokers or agents. Other insurers sell some types of coverage directly but route others through brokers. That’s how some insurance brokers can offer such a wide array of niche policies like equine and yacht insurance.
They Work for You, Not the Insurer. Unlike agents, insurance brokers represent the interests of would-be policyholders, not insurance companies.
Cons of Working With an Insurance Broker
Working with an insurance broker isn’t all upside. They can complicate the process of buying insurance and don’t guarantee the best deal or best-fit policy for your needs. For example:
They Add a Middleman to the Process. I was skeptical about working with an insurance broker because I don’t like middlemen. And if I hadn’t gotten such a good deal, I’d probably still feel that way. Buying direct is simpler, for sure.
They May Not Be Necessary. If you’re buying a single type of insurance coverage and are willing to put in the research hours, working with a broker probably isn’t necessary. It’s all about your comfort level with the process of researching and buying coverage.
They Don’t Guarantee a Better Result Than Buying Directly. Most insurance brokers are careful not to insinuate they can get you a better deal than you can get on your own. It often works out that way, but sometimes it doesn’t. So it’s not something you can expect.
Do You Need an Insurance Broker?
Anyone might get a better deal from an insurance broker if there’s one to be had, so it may be worth considering, either way. But the more complicated your insurance needs, the more you need one.
You can get away without an insurance broker if:
You’re shopping for a single type of insurance, such as car insurance or life insurance.
You’re willing to do your own research on several different insurers.
You can spare the time to communicate with multiple insurers — potentially several hours spread over days or weeks.
You’re willing to get quotes directly from each insurer.
You have a basic understanding of how insurance works and can compare important quote details like premiums, coverage, and policy limits.
Other times, working with an insurance broker is probably the way to go. Situations in which a broker makes sense include:
You’re shopping for several different types of insurance at once.
You don’t know much about the types of insurance you’re shopping for and don’t have the time or inclination to research them.
You don’t have time to communicate with insurance companies before you apply.
You want assurances you’re getting the best possible deal on coverage.
Even if you don’t specifically need to, working with a broker reduces your own time and aggravation, could save you money, and doesn’t cost anything out of pocket, so it might be worth a shot, either way.
Working with an insurance broker is only one way to shop for insurance. If you’re still unsure whether it’s right for you, it may be helpful to get some questions answered.
Can You Save Money Purchasing Insurance Through an Insurance Broker?
Many insurance companies count on insurance brokers to send them new business, and they’re willing to sweeten the deal with lower premiums. That said, you’re not guaranteed to save money purchasing insurance through an insurance broker.
How Can I Buy Insurance Without a Broker?
Depending on the type of insurance and the insurance company, you can buy insurance through an insurance agent or directly from the insurer. But some insurance companies don’t sell insurance directly to policyholders, in which case you have to go through an agent or broker.
How Do Insurance Brokers Make Money?
An insurance broker earns a commission when they refer a new policyholder to an insurance company and that customer buys a policy.
Shoppers and policyholders don’t pay brokers. If a broker asks you for upfront payment, it could be a sign of a scam.
Insurance agents can make it seem like they have your best interests at heart. But that’s not always the case. Opting for an insurance broker ensures you’re working with someone whose sole goal is helping you get the best coverage for you.
That’s not to say you should only work with an insurance broker and never an agent — or that you need expert help at all. If you’re familiar with the type of coverage you’re buying and willing to take the time to get multiple quotes directly from insurers, you might not need the help.
But you might be pleasantly surprised by a broker’s results. An hour or so of work with my insurance broker slashed my homeowners insurance premium in half and spared me the aggravation of getting multiple quotes on my own. I’d certainly recommend it.
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