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Q

What is a car insurance broker?

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A

A car insurance broker helps shoppers compare quotes from multiple insurance companies and choose the best coverage. Unlike captive agents, brokers don’t work for just one company, they partner with multiple carriers.

Zack SigelAnna Swartz 1600

Zack Sigel & Anna Swartz

Published December 27, 2019

KEY TAKEAWAYS

  • A car insurance broker works with multiple insurance companies to offer shoppers a range of car insurance quotes

  • Most brokers are paid by a commission that’s baked into the premiums you pay, so you usually don’t need to pay them a fee to help you shop

  • A good broker will help you compare quotes and choose the coverage that’s best for your needs and your budget

Buying car insurance can feel overwhelming at the outset. You have to choose the types of coverage you need, and how high to set your coverage limits and deductibles. If you lease or finance your car, you may have to add certain required coverages to your policy. Then you have to compare car insurance quotes, and choose the one that offers you the best protection for a low premium.

A car insurance broker can help you with all that. Car insurance brokers are a type of agent who work on behalf of car insurance companies to help you compare and choose insurance policies.

Unlike captive agents, who are employed by a single carrier and can only get you a policy through that carrier, a broker, also called an independent agent, works with a variety of different car insurance companies. This allows them to help you understand your options without trying to sell you on one specific policy.

You don’t necessarily need a car insurance broker to find a policy that’s right for you, — unlike, say, shopping for life insurance, buying car insurance can be done in a single day and is often straightforward — but shopping with a broker could make the process more convenient. The car insurance broker can also help you make sense of what car insurance entails, including what’s in your policy and how much coverage you’re obligated to purchase in your state.

In this article:

What is a car insurance broker?

A captive agent who works for a single car insurance company may have more detailed information about that company’s products, but an independent broker can help you compare rates across multiple insurance companies and choose the best policy for your needs. A broker can also give you advice about how much coverage to purchase.

When you purchase car insurance, your rates are determined by a number of factors, including your age, ZIP code, address, driving history (including any past accidents or violations), credit score and the make and model of car you drive.

The amount of coverage you purchase will also affect your car insurance rates. While your state may mandate a minimum level of coverage, as almost every state does, you should probably purchase more insurance than your state requires.

Say your state requires you to have $40,000 worth of property damage liability coverage. If you’re the at-fault driver in an accident that results in $60,000 worth of property damage, you’d be on the hook for the remaining $20,000.

That’s why it’s smart to set your liability limits higher than your state requires. You’ll probably also want coverage that isn’t required by law, like collision coverage and comprehensive coverage. A broker can help you decide which kinds of coverage to include and how much you need.

When you work with a car insurance broker, they’ll submit that all that information; How much coverage you want, plus all your basic personal info, to all the companies they work with. That way the broker can get you a range of car insurance quotes at the same time, rather than you submitting that information again and again to each car insurance company individually.

One car insurance broker can’t necessarily get you a better deal than any other broker or agent. That’s because insurance rates are highly regulated by your state government, based on a “rate table” negotiated with the insurance carriers. But the broker can help you understand how your car insurance needs are reflected in your rates and make sure your coverage is sufficient.

Brokers solicit car insurance quotes – the estimated amount you’ll pay in premiums once your policy is in effect – from insurance companies, but may not be able to actually take out the policy for the customer. In that case, they would send you over to the insurer for the final step. The insurance company pays the broker a commission out of the insured’s premium payments.

Insurance brokers have to be licensed by your state’s office of insurance. That means not only taking a class and passing an insurance exam to get their broker’s license, but also taking continuing education classes and renewing their license every couple of years. Every state has its own laws and regulations regarding insurance.

What does it cost to use a broker?

In most cases, using a broker to purchase car insurance doesn’t cost you anything directly. However, some may charge you an insurance brokers fee for their services, the amount of which is regulated by state law. Your state may also regulate when the broker can charge you the fee – sometimes, the broker cannot receive both a fee and commission – as well as mandate that the broker signs a fee agreement with you.

Always ask your broker up front about any brokers fees associated with their service. Fee-only brokers are rare, so it’s more likely that your broker works on commission from the various car insurance companies they partner with.

Who pays a car insurance broker?

Brokers get paid a percentage of insurance premiums, called a commission. As with fees, state law regulates how much of a percentage the broker can receive. The commission is baked into your premium costs, so buying a policy through a broker doesn’t come at any extra cost to you.

Because brokers work with multiple car insurance carriers, and they’ll be paid no matter which one you choose, they shouldn’t have any financial incentive to push you towards one carrier over another. Instead, they should help you weigh your options and choose the best policy for your needs.

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Why go through a car insurance broker?

Car insurance brokers are a little bit like a personal shopper. They know what you want and have the resources to get it for you as conveniently as possible. That saves you the time of doing the research on your own, which can be tedious.

Because they already have all your information on hand, car insurance brokers already know which carriers are more likely to insure you. If you have bad credit, they can provide you a range of car insurance quotes from car insurance companies that service people with bad credit.

The same is true if you have a poor driving history or if you’re a new driver. Without a broker, you won’t know how your profile affects your rates unless you take the time to compare them yourself.

Brokers can also help you navigate the application process, such as finding the right documents to submit. When you choose how much coverage you need in each component of the car insurance policy, the broker can help you understand what that coverage means and how much they recommend for your particular situation.

A car insurance broker can also help you add additional coverage, such as in components beyond the baseline that can enhance your financial protection further.

Because they have your application, it’s easy for a broker to quickly gather quotes from all the companies they work with, while if you were doing it alone it might take you a long time to get the same number of quotes. And they can keep your information at the ready in case you want to go back to the same broker for another insurance product, like homeowners insurance or renters insurance.

How to find car insurance without a broker

The biggest downside to using a car insurance broker is that it may not be necessary. That’s because you can usually go directly to a car insurance company’s website and either apply for coverage directly on the page or get a number to call the company and take it from there. You may be able to find coverage for the same rates without going through a broker, if you do your due diligence.

If you decide to find and purchase a car insurance policy on your own, you’ll want to apply with multiple carriers, and then compare coverage options and rates. Make sure you’re comparing the same coverage limits, deductible amounts and term lengths — one quote might look significantly cheaper than another if it’s for a six-month policy instead of a year-long one.

You should also read reviews of popular car insurance companies to see how they score on metrics like claims satisfaction or customer service. You probably don’t want to go with the cheapest car insurance quote if the company is known for denying claims or delaying payouts.

One of the perks of using an independent broker is that they’ll know a lot about the reputation of each carrier already, and they can help guide you towards companies with higher rates of claims satisfaction.

If you have a documented record of safe driving or good credit, you’ll be eligible for the best rates at virtually any car insurance company when you contact directly, meaning you won’t necessarily need the car insurance broker’s ability to query a lot of them at once.

While federal law makes it easy to become licensed in other states, your insurance broker may only be licensed in just your state. That could make it difficult to insure cars you own in another state, or to make sure your coverage remains the same when you move.

Managing Editor

Zack Sigel

Managing Editor

Zack Sigel is a SEO managing editor at Policygenius. He covers personal finance, comprising mortgages, investing, deposit accounts, and more. His previous work included writing about film and music.

Insurance Expert

Anna Swartz

Insurance Expert

Anna Swartz is a Managing Editor at Policygenius in New York City, and an expert in auto insurance. Previously, she was a senior staff writer at Mic, writing about news and culture. Her work has appeared in The Dodo, AOL, HuffPost, Salon and Heeb.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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