A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 26, 2021

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Here's what you need to know...

  • An auto insurance broker is an independent contractor who is free to match their clients to policies with several different insurance companies
  • The major difference between a broker and an insurance agent is that the agent works for a company and represents the company, whereas brokers shop the market for their clients and have a fiduciary duty to act in their client’s best interest
  • Since brokers require a different kind of license to sell insurance, they can only sell products in one state at a time, whereas agents can apply for licenses in multiple states
  • Since auto insurance brokers work with several different companies at once, they are familiar with the underwriting guidelines through each carrier so they can easily help you select the best policy
  • Insurance brokers can help you find the best coverage, but the service comes at a cost

It might sound as if auto insurance agents and brokers are two titles that mean the same thing, but in the insurance industry a broker and an agent play two very different roles.

When you’re shopping for insurance, knowing the role that each professional who sells insurance plays can help you make your mission to find competitive premiums easy.

There are pros and cons to doing business with a broker instead of an agent. Before you select a producer or an insurance company, it’s your duty as a consumer to do your research so that you know who to turn to.

Read this guide and learn what differentiates a broker from an agent so that you are prepared to comparison shop.

Enter your zip code into our FREE comparison tool to start comparison shopping!

What is the main difference between a broker and an agent?

An insurance agent, also known as a captive agent, is a licensed professional who is trained to sell insurance products through one auto insurance carrier. Since agents exclusively sell insurance through one carrier, they represent the company that they work for and may make commissions based on their sales.

An insurance broker is an independent contractor who sells products offered by several companies. They are not bound to one company and are free to set their own hours.

Like an agent, a broker has a professional license to operate.

But the qualifications for a broker’s license are more strict and professionals can’t hold multiple licenses in different states at one time.

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Brokers Represent Their Clients

When you’re buying auto insurance, you want to feel like you are working with a professional who is on your side. Unfortunately, since captive agents are employed by the company offering their products that they are promoting, their responsibility is to look out for the interests of their employer.

When a broker is licensed, it’s their legal responsibility as a fiduciary to represent the insurance buying public when they are giving out quotes and advising clients.

If one company isn’t a good match, the broker can move on to another company so that it favors the client’s interests. This is what pushes many people to brokers instead of agents.

What is the role of the insurance broker?

Since brokers work independently, they set their own hours and cover their own operational expenses. Because of this, brokers must have a strong business acumen while still being well-versed in insurance. Agents might only market and sell products, but brokers do more than just write a policy. Here are some of the roles of brokers:

  • Advising clients so that they can select the right coverage options and limits
  • Discussing your budget and driving history to match you to the right carrier
  • Advising you of the limitations of your policy and the exclusions that could put you at risk
  • Explaining the policy coverage options you are carrying, how much each coverage costs, and how much the policy costs as a whole
  • Advising you of the payment options that are available through a certain insurer
  • Informing new and existing clients of new products and endorsements that can offer you more protection
  • Helping clients with annual checkups to ensure the policy is accurate
  • Assisting clients with inquiries or making changes when necessary
  • Assisting clients when they have an insurance claim to file

What are the main benefits of working with an insurance broker?

One of the huge benefits of working with a broker is that they will do the comparison shopping for you. Since they are trained and knowledgeable on the guidelines through several carriers, they will know which carrier to focus on and which carrier to avoid.

The recommendations that you are given can help you explore the market without feeling like you are working closely with a salesman. It’s very important that you research the brokers doing business in your area so that you find an experienced professional that has a lot of experience in the field. Check the broker’s credentials before you contact them.

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Know How Insurance Brokers Make Their Money

Where there are benefits there are always going to be drawbacks. You can really save money on your premiums doing business with a broker, but the services that they provide aren’t free.

Brokers make their money by charging a broker fee for the services that they offer the public. It’s also typical for a broker to charge a fee to process changes to your policy.

Is there a limit to how much a broker can charge?

Brokers are free to set their fees, but state regulations say that consumers must agree to pay the fee in advance. It’s also imperative that all brokers give a disclosure to their clients detailing the fee.

Always remember that fees are negotiable. Many brokers receive a commission on the products that they sell.

Commissions range between two and eight percent of the premiums. Brokerage fees vary significantly, with more experienced brokers charging higher fees.

If you don’t want to pay a fee to compare premiums through several carriers instantly, you can use an online rate comparison tool for free. Online quoting tools are brokerage-style systems that help you get instant quotes without having to contact multiple insurers.

By inputting your personal information in the form once, you can review instant quotes and make a quick decision on what product to buy.

Enter your zip code into our FREE comparison tool to start comparison shopping!