You can buy car insurance in a variety of ways. You can contact the insurance company directly, buy coverage online, work with an insurance agent who only represents one insurance company or find an insurance broker or independent agent who deals with several insurance companies.
Which avenue is best depends on your experience with auto insurance, the agents and brokers in your area and which car insurance companies interest you,
Let’s talk more about car insurance brokers and the positives and negatives of going that route.
What are insurance brokers and insurance agents?
The specific definition of an insurance broker can vary by state. Generally, an insurance broker works with several insurance companies, while captive agents work with one company.
Here are the differences between insurance brokers and insurance agents:
- The insurance broker technically represents the consumer.
- The agent represents the insurance company, but an independent insurance agent may work with several companies, too.
Sometimes, the terms insurance broker and independent agent are used interchangeably. They can be small business owners who work with several insurance companies while a captive agent only works for one insurance company.
Some insurers, such as State Farm and Farmers, work only with captive agents. However, most car insurance companies work with independent agents and insurance brokers who have relationships with several insurance companies.
What does an insurance broker do?
Insurance brokers compare multiple insurers to find the right policy for you.
Derek Ross, who owns the Kulchin Ross insurance brokerage in Tarzana, California, works with more than 20 insurance companies. That list includes Travelers, Hartford and Chubb. Ross says each company has its pricing and underwriting models.
When he meets with a client, the broker gathers their information and enters it into a competitive rating tool. The tool shows each insurer’s premiums, insurance policies, underwriting questions and whether the insurance company is likely to approve or decline the client.
A broker should also know which insurance companies weigh a credit score more than another. How much an insurance company weighs credit history can influence the insurance rate.
“There are many differences among those carriers,” says Ross. “Some are geared toward very high-value vehicles, some are geared toward drivers with DUIs or poor driving records, some are better for younger drivers than older drivers, some are more competitive in rural areas than city areas,” he says.
Sometimes, several insurance companies charge similar prices for drivers without any unusual features. The insurance broker can help you choose an insurer based on other factors.
“Say we’re quoting a husband and a wife who live in the suburbs and are driving a Ford Explorer and we may get 10 companies priced around the same,” says Ross.
“We can choose which company is providing the best coverage and which is providing the best claims service or which may have the most attractive payment plan. There are so many nuances that can be different from one carrier to the next, and that’s where a broker can stand out.”
How much do you have to pay a car insurance broker?
Insurance brokers and insurance agents generally get paid commissions from the insurance company. The commission is based on a percentage of the insurance premiums paid.
Depending on state law, insurance brokers may charge a separate brokerage fee to the consumer, although many do not. It’s more common for an insurance broker to charge an extra fee when selling business insurance than personal insurance, says W. Michael McBride, president of Mason-McBride, an independent insurance agency in Troy, Michigan.
When you’re thinking about working with an auto insurance broker, ask about any additional fees.
What to look for in a car insurance broker
When choosing a broker, talk with friends and neighbors about their experiences, especially if they’ve filed a claim. Find out how many companies the broker works with and ask how they plan to find the insurance policy with the best coverage and price for your situation.
“We represent seven or eight personal lines insurers, and if I describe a particular prospective client to our staff, they’ll tell me who will be the most competitive without even rating it in the system because they have a finger on the pulse of what’s happening in the marketplace,” says McBride.
Ask how they plan to provide additional guidance, such as doing insurance needs analysis to determine how much coverage you need. Also, ask what you can expect them to do to help if you have a claim.
You can find an independent insurance agent or broker in your area by using the Independent Insurance Agents and Brokers of America’s TrustedChoice.com database, where you can look up agents and brokers based on location and types of insurance.
Pros and cons of using auto insurance brokers
Insurance brokers have their benefits but there are drawbacks, too.
Why you may want to use insurance brokers
- An auto insurance broker can help you compare insurance premiums and coverage from several insurance companies.
- Insurance brokers usually know which insurers specialize in different situations, such as drivers with poor driving history, older drivers and younger drivers.
- A broker can help you determine how much coverage you need, how to fill any coverage gaps and when it may work better to keep all of your coverage with one insurance company rather than having separate insurers for auto, home and other types of insurance.
Why you may not want to use an insurance broker
- An insurance broker doesn’t work with all companies. Let’s say you’d like to get price quotes and information from major insurers, such as State Farm, Farmers and USAA. You’ll usually need to work with insurance agents or buy coverage directly from the insurer.
- It can be a good idea to compare prices and coverages from an independent agent or broker and from a captive agent who works with insurance companies that the broker doesn’t represent (or directly from the insurers). That way, you can get a broader overview of the marketplace and see which insurer has the best match of coverage and cost for your situation.
“While auto insurance might seem not to have a lot of moving parts, there is a degree of complexity,” says McBride.
Shopping for car insurance online without a car insurance broker
If you feel comfortable, you can shop for online car insurance and compare rates from several insurance companies, including many of the same companies that work with agents or brokers.
You can use a website that lets you compare prices from several insurers, such as carinsurance.com, or get price insurance quotes directly from the insurance company. If you know how much auto insurance you need, this can be a way to quickly compare insurance rates or start your research on your own at any time. Make sure you compare insurance policy quotes for the same amount of coverage with each insurer.
Without an agent or broker, you won’t have the personalized attention to help assess whether you have the right coverage. For example, an agent or broker may help you determine how much liability coverage is recommended based on your assets and risk factors.
An independent agent or broker can also help you figure out whether it’s better for you to get your car and home insurance with the same company vs. with two different insurers based on your specific situation.
There may be some coverage factors beyond price. For example, some insurers may have better coverage for historic homes with special details. Also, there may be benefits to bundling your home and car insurance coverage with that company, even if it may be slightly more expensive.
The agent or broker can also advocate if you have a claim.
“The independent agent will know how the various carriers handle their claims and will work to align your expectations with the claims process,” says McBride.
If you’d like to do the shopping on your own, do extra research yourself. Study the coverage details and use some online tools and resources to help determine how much coverage you need and how to fill in any gaps.
Also, research how the company handles claims and learn about the differences between the companies in addition to the price.
Read customer reviews for the insurer, and find out about its complaint record through your state insurance department (you can find links to your state insurance department).