How Do Insurance Brokers Make Money? (Explained!)

Insurance Brokers

Insurance brokers make money off commissions from insurers and broker fees. Your premiums consist of many things, including broker or agent commissions. For every premium payment, you make a percentage of it goes to your broker as commission. 

Alongside this, they may also charge a fee called a broker fee or brokerage fee for their services. They are required to inform you such of fees, and some states regulate these fees, for example, Florida.

Insurance Brokers – Who They Are And What They Do?

Insurance Brokers

Insurance brokers are a connecting link between you and insurance companies. They help you get a policy that meets your insurance needs at an affordable rate. 

Using an insurance broker can save you precious time and money when searching for a provider; however, you spend slightly more than you would’ve to search for insurance on your own.

Insurance brokers act on behalf of their clients and not the insurer. They go through the process of soliciting quotes from different companies. However, they cannot initiate a policy for you without signing a binder agreement.

We should mention that not everyone needs the services of an insurance broker. You choose to purchase your insurance depending on you, but brokers are best suited for clients with complicated insurance needs.

Advantages Of Using Brokers

Advantages Of Using Brokers

1. Accurate Information – brokers are in the best position to provide you with accurate information concerning insurance policies

2. Cost-saving – you save time and energy searching for an insurance policy when you engage the services of a broker.

3. Easy claim process – when you need to make a claim, your insurance broker can handle the process on your behalf.

4. Tailor-made services – with an insurance broker, there is a higher chance of purchasing a policy that suits your needs rather than a one size fits all policy.

Disadvantages Of Using Brokers

1. Lack of Professionalism – it is easy for anyone to pose as an insurance broker and scam you with a fake license. 

2. Limited offers – brokers can only give you the information they have available, so it is possible to miss out on great deals because your broker does not know about them.

3. Additional charge – asides the commission they will receive from your premiums, some brokers charge a broker fee for their services

4. Profit-driven – some brokers don’t care about giving you a policy that meets your needs; they only care about their commissions.

How Brokers Make Their Money

There’s no harm in gaining insight into how insurance brokers make a living. Having this information serves a benefit – it protects you from brokers who care more about filling their pockets than ensuring you get a policy suitable for your needs. 

Brokers make money majorly through commissions and fees.


When a broker places you on a policy from an insurer, they receive a commission from this insurer; The amount varies with each company. Usually, their commission is a percentage of your premium. 

Insurers pay a higher commission for first-time customers, I.e., new customers, than they do for policy renewals. 

Brokers have a financial objective when they do all they can to keep you happy with your policy. In most companies, brokers are required to repay their commission when you stop making payments on your policy or cancel it together during the early stages of your insurance policy.

Note that commissions form a part of your premium, so even if you shop for your insurance without the aid of a broker, you will pay the same amount as someone who purchased their policy through a broker. 

The only difference is that the percentage of your premiums dedicated to commissions remains with the insurer.

Some brokers will advocate for one insurer over the other if they receive higher commissions. They may also receive gifts, bonuses, and other incentives from such insurers. 


The second way insurance brokers make money is by charging broker fees. These fees are reasonably priced, and customers must be aware of them. 

Some states also have restrictions on how high these fees can be. For example, in Florida, broker fees cannot exceed $35. In addition, these fees are usually non-refundable. 

Insurance Brokers Vs. Agents – What’s The Difference?

It is easy to confuse an insurance broker with an insurance agent; after all, they share the same objective – to provide you with a policy that suits your needs at a reasonable cost. 

They also share other similarities:

1. They act as intermediaries between you and the insurer

2. They must be licensed to sell whatever insurance they advertise 

3. And they are obligated to follow the insurance laws present where they operate

However, there are major differences between the two; we highlighted a few of them below: 

Insurance AgentInsurance Brokers
They represent the companyThey represent clients
They sell insurance on behalf of the company they represent and, depending on the content of their contract, can initiate a policy.They solicit quotes from different companies for clients and need a binder to initiate a policy for them.
Agents may be captive or independent. Captive agents represent a single insurer, but independent ones represent multiple insurers.Brokers may be retail or wholesale.

Frequently Asked Questions

We’ve compiled a list of frequently asked questions and answers. These FAQs will help you understand everything you need to know about how insurance brokers make money. Let’s check it out!

Do Insurance Brokers Make A Lot Of Money?

According to Ziprecruiter, the average annual salary of an insurance broker ranges from approximately $61000 – $95000. Washington, Maryland, and Nebraska are the highest paying states. 

Who Pays An Insurance Brokers Commission?

Brokers receive their commission from the insurer you purchase a policy from. Your insurance premium consists of various costs such as operational costs, broker commissions, etc. Their commission is a percentage of your premium, and most times, insurance companies provide bonuses as well.

How Much Commission Does An Insurance Broker Make?

There isn’t a fixed rate for how much a broker earns on their commissions; these rates vary with each company. Their commission rate can range from 10% to as high as 23%. 


Being an insurance broker is a fruitful career path, but it’s not easy. The licensing process is rigorous; however, if you decide to go through with it, you are sure to make a good living out of it. 


How Does an Insurance Broker Make Money?

How Insurance Agents and Brokers Make their Money

Advantages and Disadvantages of using Insurance Brokers

Insurance Brokers: What they Do and Who Needs One

Leave a Comment

Your email address will not be published. Required fields are marked *