What Is an Insurance Broker?

What Does an Insurance Broker Do?

Buying insurance products such as disability insurance, life insurance or small business insurance can be complicated. Making the wrong decision could leave you without the coverage you need in an emergency. Insurance brokers can search out suitable policies, sift through all your options and make recommendations to help you find a policy that balances your needs and your budget.

Insurance brokers can:

• Advise you on the amount and type of insurance you need
• Get quotes from insurance companies on your behalf
• Help you compare rates and policies
• Recommend the best coverage
• Find ways to lower insurance costs
• Answer questions and explain how insurance works

If you're purchasing health insurance, either from a federal or state health insurance marketplace or privately, there are specialized health insurance brokers who can help. Health insurance brokers may be able to:

• Suggest ways to maximize savings
• Help you qualify for financial assistance such as premium tax credits
• Guide you through the enrollment process
• Answer questions about your coverage after you've purchased your insurance

Insurance brokers cannot sell insurance directly. Instead, they work with insurance agents to get coverage for you once you've decided which policy you want to purchase.

How Are Insurance Brokers Paid?

Like insurance agents, brokers may receive a commission from the insurance company from which you purchase your policy. You generally don't pay the broker directly; instead, their commission comes out of your premiums. Brokers may also receive a commission each year when you renew your policy. This can motivate them to find a plan you'll be happy with.

Broker vs. Agent

You can also get insurance through insurance agents. There are two types of agents:

• Captive agents represent a single insurance company. Some captive agents are employed by the company, while others are independent contractors.
• Independent agents don't work for a specific insurance carrier. Instead, they represent multiple insurance companies and are usually independent contractors. Like insurance brokers, independent agents can help you compare plans from different carriers, but keep in mind that agents ultimately work for the insurance company.

Both insurance agents and insurance brokers are regulated and must be licensed by the state in which they work. However, there are some key differences between the two.

• Brokers work for consumers; agents work for insurance companies. Even though insurance brokers may receive commissions from insurance companies, their primary responsibility is to you, the consumer.
• Insurance agents sell insurance; brokers do not. Brokers cannot legally sell insurance. Once you've chosen the policy you want, your broker will work with an agent to secure coverage for you.

Should You Use an Insurance Broker?

Deciding whether or not to use an insurance broker is going to depend on your individual situation.

You might benefit from an insurance broker if:

• You lack the time or desire to shop around on your own. If spending hours researching insurance on the internet isn't your idea of fun, why not outsource the search to a professional?
• You want to save money. Brokers know how to take advantage of insurance discounts and can often unearth potential savings you may not be aware of.
• You want to explore a wide variety of options. Compared with using a captive agent or even an independent agent, an insurance broker can expose you to more alternatives.
• You're not sure how much insurance you need. Insurance brokers can assess your coverage needs and coordinate among your various types of insurance. This helps ensure that you're covered but not over-insured (which can waste money).

Shopping for health insurance? You may need a health insurance broker if:

• You've never bought health insurance before. The intricacies of health insurance plans can be daunting. A health insurance broker can help you understand all the ins and outs of coverage and explain unfamiliar terms.
• You're self-employed. If you can't get health insurance through a job, a broker can help you compare private and health insurance marketplace options to find the best plan.
• You're interested in premium tax credits. Certain individuals and families buying health insurance on state or federal health insurance marketplaces qualify for tax credits that help offset the cost of premiums. Insurance brokers can help you maximize these credits, saving money.

You may not need an insurance broker if:

• You're the DIY type. Do you enjoy researching insurance and making your own comparisons? If you feel confident in your own abilities and have the time to do the legwork, you probably don't need to enlist a professional.
• You're choosing between a few simple options. For example, if you're comparing different health plans offered by your employer, or plans from your partner's employer and your employer, the health plan provider should be able to explain your alternatives.