If you’re thinking about getting insurance but feeling overwhelmed by the different options, there is help available. Enter the insurance broker. So what is an insurance broker? What do they do? How do they differ from an insurance agent?
To start, it’s important to note there are a few different types of insurance brokers. This article discusses brokers who sell directly to individual insurance clients, known in the industry as a “retail broker.”
What is an Insurance Broker?
To fully explain the role of the insurance broker, let’s quickly review the role of an insurance agent. Insurance agents are representatives of insurance companies. Whether one is a “captive agent” who works solely for one insurer, or an “independent agent” who sells policies for a multitude of insurers, their job is to sell and bind insurance on behalf of the insurance company. They can offer policies and describe details but do not act in an advisory role.
The insurance broker, on the other hand, works for you, the buyer. Think of them as your own personal shopper for insurance. They’ll ask you a bunch of questions to understand your coverage needs and budget, and then use their expertise to find the best insurance policies for you. The broker will present you with options and act as an advisor, helping you determine which policy suits your needs and why.
Insurance brokers don’t work directly for one insurance company. Brokers are able to offer and sell different policy options from a variety of insurance companies. In many cases, they also have access to special deals and discounts that aren’t available to the general public. However, brokers are not able to bind coverage directly. Once you are ready to buy an insurance policy, the broker will obtain a binder from an insurance company or an agent to finalize the insurance contract.
Like agents, insurance brokers usually earn commissions from the insurer on the policies they sell so working with a broker doesn’t cost the customer any additional fees.
Good insurance brokers are experts in the products they offer. They know the ins and outs of different policies and can match them to your specific needs while explaining everything so that a layperson understands. This can help policyholders avoid costly mistakes, like underinsuring themselves or getting coverage they don’t need. If you ever have questions or concerns about your insurance coverage, they’re just a phone call or email away.
Most importantly, an insurance broker works for the buyer, not the insurance companies.
Other Types of Insurance Brokers
There are two other types of insurance brokers; the wholesale broker and the surplus lines broker.
Wholesale brokers sell more specialized insurance products that focus on unique, niche, distressed, or high-capacity risks that aren’t usually available in the standard insurance market. They do not usually work directly with the customer. When an agent or a retail broker has a client who needs this type of coverage, the agent or retail broker will work with the wholesale broker on the customer’s behalf.
A surplus lines broker may be needed if the client’s insurance needs are greater than what the standard market is willing to insure, the business is very risky and requires complex coverage that standard insurers won’t underwrite, or the business has a significant history of claims and losses leading it to be deemed too risky by standard insurers. A surplus broker can either be retail or wholesale. Because of the risks involved in this insurance and the need to access particular insurers, some states require a special license to work as a surplus lines broker.
Become an Insurance Broker
To become a retail or standard wholesale insurance broker, you will need to pass an exam and be licensed by your state. In most cases, it is the same license and exam you would take to become a captive or independent insurance agent. All-Lines Training offers insurance pre-licensing and exam prep courses that will help you prepare to pass your state’s exam.
Working with an insurance broker is a great option for navigating the complex world of insurance. They’re knowledgeable, helpful, and working with your best interests in mind. If you need insurance but aren’t sure where to start, look for a good insurance broker. They’ll find the perfect policy for your needs.