Using Car Insurance Brokers

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Joel Ohman
Founder, CFP®

UPDATED: Jan 6, 2017

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Here's what you need to know...
  • Car insurance brokers work for agencies to sell auto insurance policies from many different companies
  • They have a vast knowledge of insurance needs and available discounts and are not simply selling from one insurance carrier
  • Many people no longer use brokers, as online research has become something most anyone can do

When searching for car insurance, there are several ways to go about it, including online searches, calling individual car insurance companies, and going through car insurance brokers.

Among all of them, car insurance brokers are the least talked about because they are the least used.

The primary reason to talk about car insurance brokers rests in the fact that, in order to drive legally in the U.S., you must carry some sort of insurance on your car — be it through a licensed insurance company or through self-insurance.

Because it’s the law, the best we can do is look for the deal that meets our needs at the best price. That’s where the broker comes in.

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Car Insurance Brokers Defined

Car insurance brokers are individuals who work for local or regional insurance agencies rather than car insurance companies.

But before talking about the broker, let’s define an agency versus an insurance company. Where the car insurance company actually writes the policy that covers the driver, the agency is an independent entity that writes no policies.

Instead, it represents one or more insurance companies in selling policies and maintaining customer relationships.

A car insurance broker works for an agency as the “man in the field” who services customers and individual policies.

His job is to research all of the policies offered by the various insurance companies his agency represents. He works on behalf of those car insurance companies to present the best deal for the individual customer and help you save money on car insurance.

The better a broker is at his job, the more policies he’s likely to sell and the happier his clients will be.

Becoming a Car Insurance Broker

Portrait of a student girl studying at library

Car insurance brokers are not required to complete endless years of education like a doctor or lawyer, but there are some requirements nonetheless.

Most agencies will not hire anyone without at least a bachelor’s degree in business management or some other related field.

So, after completing high school, a candidate would probably attend a community college or local business school where a bachelor’s degree can be earned in two to four years.

After graduation from college, there are generally two options to choose from.

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The first option is to try and get hired on with insurance agency as an administrative assistant. While you’re there you can learn the insurance underwriting business and all you’ll need to know for state licensing.

The second option is to pursue licensing immediately after graduation.

Regardless of which option you choose, you will not be able to work as car insurance broker in most states without a license. Each state has different requirements for licensing, but most commonly it’s a written test and a limited amount of work-related experience.

How Car Insurance Brokers Get Paid


Car insurance brokers are more or less commissioned salespeople who get paid according to the policies they sell.

In most cases, the agency will pay a base salary to begin with, which is usually 50 to 60 percent of what you would need to provide a basic standard of living, and then add to that salary through sales commissions and bonuses.

Sales commissions can be a straight-up number — say $100 per policy for example — or it could be a percentage of a policy’s annual dollar value. For example, a sales commission of 3 percent on a $1,000 policy would be $30.

Because car insurance brokers receive a large portion of their compensation through commissions and bonuses, they are motivated to sell policies to their customers.

The best brokers know that happy customers will make them the most money in the long run by referring their friends and renewing their own policies.

Therefore, they will strive to find the best policies at the best prices. Brokers who simply look to sell the most expensive policy regardless of how it affects the customer is one who is shortsighted and only looking at the bottom line.

Although most of us will probably never use a car insurance broker to purchase our policies, we probably will use one when comes to homeowners insurance, annuities, or other more complex insurance products.

In some cases, an agency will be able to bundle all of your insurance needs together, which would then mean your car insurance would be part of that scenario.

Regardless, a good car insurance broker is a great benefit to the customer. If you decide to use one, be sure to choose wisely.

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