You don’t necessarily need a car insurance broker to find a policy that’s right for you, but one could make the process more convenient.
Shopping for car insurance can be difficult if you don’t know what you’re looking for. There’s a lot to know about car insurance, such as your premium and deductible, or the types of car insurance you need before you get behind the wheel. Most importantly, you want to make sure you’re getting the best deal for the coverage you’re purchasing.
A car insurance broker can help you with that. Car insurances brokers are a type of agent who works on behalf of car insurance companies to find you a car insurance policy. Captive agents 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 and can help you understand your options.
You don’t necessarily need a car insurance broker to find a policy that’s right for you, but one 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. (We also go into detail about that kind of information here.)
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An agent who works for a single car insurance company may have more detailed information about that company’s products, but an independent broker could help you compare rates.
When you purchase car insurance, your rates are determined by your coverage needs. While your state may mandate a minimum level of coverage, as almost every state does, your actual coverage needs should take into account the costs of things you’d have to cover out of pocket: medical expenses and repair bills you’d have to pay if you caused a collision and the price of replacing your car or items in your car.
Additionally, your rates will be influenced by your personal characteristics: what kind of car you drive; your age, gender, location, and marital status; your driving history, including how much and whether you’ve been involved in any traffic violations; and any safety features you installed on your car.
When you work with a car insurance broker, he or she can submit that information to as many companies as he or she works with. That way the broker can get you a range of 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 quotes – the estimated amount you’ll pay in premiums once your policy is in effect – from insurance companies, but often don’t have the power to actually take out the policy for the customer. That authority may lie solely with the insurer, who 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 getting a class and passing an insurance exam but also taking continuing education classes and renewing your license every couple of years. Every state has its own laws and regulations regarding insurance.
In most cases, using a broker to purchase car insurance doesn’t cost you anything directly. However, some may charge you a 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 can’t receive both a fee and commission – as well as mandate that he or she signs a fee agreement with you. Always ask your broker up front about any fees associated with his or her service.
Brokers get paid a percentage of your 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 you could potentially save money by taking out a policy directly with the carrier.
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 quotes from car insurance companies that service people with bad credit. The same is true if you have an unfavorable driving history or if you’re a new driver. Without a broker, you won’t know how your personal classification affects your rates unless you take the time to compare them yourself.
Brokers also can 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 he or she recommends for your particular situation. The car insurance broker can also help you add additional coverage, such as in components beyond the baseline that can enhance your financial protection further.
The biggest downside to using a car insurance broker is that it may be completely unnecessary. 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’ll pay about the same rate, and maybe even less if there’s no commission baked into your premium.
Using an independent agent is especially unnecessary if you already have a documented record of safe driving or good credit. You’ll already be eligible for the best rates at virtually any car insurance company you contact directly, meaning you won’t have need of the car insurance broker’s ability to query a lot of them at once.
They also may be of little help when you file a claim. That’s because when you file a claim you’ll be working directly with the car insurance company, which will assign you a separate agent anyway for handling the paperwork.
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.
Disclaimer: 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.