Stephanie is a DC-based freelance writer specializing in personal finance. Her work covers insurance, loans, real estate investing, retirement, and more.
3+ years experience in insurance and personal finance editing
Katie uses her knowledge and expertise as a licensed property and casualty agent in Massachusetts to help readers understand the complexities of insurance shopping.
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If you’re in the market for a new home insurance policy, shopping around to find the right insurance company and coverage can be overwhelming. Having assistance from the right professional can help you determine what sort of coverage you need and narrow down your options to the best possible choice.
Unlike a sales agent, an insurance broker works with multiple insurance companies and can help you compare all your options, shop for policies, and find the best rates.
Here’s what you need to know about home insurance brokers and why you might want to work with one.
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What is an insurance broker?
An insurance broker is an agent or agency that helps buyers find and purchase insurance coverage. Brokers represent the consumer rather than the insurer, so they don’t have to exclusively show coverage options from a specific company. Brokers typically earn a commission from insurance companies when their clients buy a policy.[1]
Insurance brokers usually have a good understanding of the different homeowners insurance policy options and can help you understand your options as well as how much home insurance you should buy.
Since brokers can compare and sell policies from multiple partner companies, they can be a valuable resource if you’re unsure what coverage you need or just want to find the best possible rates for that coverage.
When it makes sense to use an insurance broker
A home insurance broker may not be the best choice for everyone looking for coverage, though working with one does have benefits.
For example, if you want to bundle more than one type of insurance policy with a single insurer, a broker can help you find the right insurance company and coverage options. A broker can also help break down your policy options throughout the process of buying coverage if you don’t know what you need from your property insurance.
Though many home insurance companies offer quotes online or over the phone in minutes, you may not have the bandwidth to explore and compare rates on your own. Having a dedicated broker do the rate shopping for you can be valuable.
Lastly, brokers are a great resource for filing future claims. An existing relationship with a broker allows you to ask questions and get guidance as you file with your insurance company and work through the claims process.
Insurance broker vs. insurance agent
Many people use the terms “broker” and “agent” interchangeably because brokers and agents both work with customers to select and purchase homeowner policies. They can also both help homeowners file claims, but a few key differences do exist.
The main difference to note is that insurance brokers don’t have any restrictions on what insurance companies they can work with, but insurance agents typically do. Captive insurance agents can only sell insurance products from one specific company, while independent agents can typically sell coverage from multiple companies.[2]
Both brokers and agents receive payments from insurance companies; brokers earn a commission, and agents typically receive direct compensation, like a salary. Because brokers don’t work for a single company or group of insurers, they represent the customer, while insurance agents represent the insurers they work for.
Learn more about the differences between insurance brokers and agents below.
▲▼
Broker
▲▼
Captive Agent
▲▼
Independent Agent
▲▼
Can they sell insurance?
No
Yes
Yes
Who do they sell coverage from?
Multiple insurers
A single insurer
Multiple insurers
How insurers pay them
Commission
Salary
Salary
Who they represent
Customers
The company they work for
The companies they sell coverage from
Cost for customers
Typically free but may have a broker fee
Typically free
Typically free
How do insurance brokers make money?
Insurance brokers can help you compare multiple policy options and then facilitate the purchase of the one you want most. They can even build a bundled homeowners insurance quote that includes multiple policies, such as renters, auto, business, and life insurance coverage. Brokers then receive payment from the insurance company in the form of commissions or a broker fee.
Customers typically don’t pay brokers, so you won’t have to pay anything extra for their services. But brokers may not be able to access certain home insurance discounts that you could get when buying directly from an insurance company (such as discounts for buying online). So, you could potentially wind up paying more for your coverage.
Good to Know
In rare cases, brokers may charge a fee for their services in addition to the commission paid by the insurance company — typically only brokers helping customers with surplus lines insurance coverage. But this isn’t a common practice.
How to find a good insurance broker
You have many insurance brokers to choose from, so searching for the right one for you might feel a bit overwhelming. The most important goal is to find someone you trust who is qualified to help you shop for the coverage you need.
Word of mouth is an ideal way to find brokers, so ask your friends, family, and professionals like your real estate agent to see who they trust. You can also read reviews online to make sure you’re working with a reliable and professional service.
Whoever you choose, you should always confirm their credentials, such as a valid license in your state. This will also help you to avoid ghost brokers — fraudulent brokers who offer you fake policies, often at cheaper rates than you’ll find elsewhere. The policy you “purchase” is a scam, though, and clients usually don’t learn the truth until they try (unsuccessfully) to file a claim with the company.
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Pros and cons of using an insurance broker
It’s important to consider the advantages and disadvantages of working with an insurance broker.
Pros
You’ll get a personalized relationship with a real person. Working with an insurance broker offers you a personalized experience with an expert.
You can ask questions and build the right coverage. Brokers make it easier to build a home insurance policy that meets your needs andshop for bundled coverage.
It’s easy to shop for the best prices. Brokers may have access to special policy options or know about deals and discounts that you might not find on your own.
You’ll have someone to guide you through future claims or policy changes. A trusted broker can provide relevant information, be someone to bounce questions off of, and help guide you through the process.
Cons
You can’t buy from all insurers. Brokers may only sell you policies from select companies they work with regularly. You may find more policy options when shopping around on your own.
You may not have access to certain discounts. Some insurance companies offer discounts for buying coverage online, which you may not access when shopping for a policy through a broker.
You may have to pay a broker fee. Some brokers charge a fee for their services, so it’s a good idea to read the fine print carefully.
There may still be a conflict of interest. Brokers represent customers, not insurance companies. But they do earn commissions from insurers. A broker could nudge you toward one insurer over another if it pays a higher commission.
Home insurance broker FAQs
The following information can help answer your remaining questions about home insurance brokers and the services they offer.
Is a home insurance broker worth it?
It depends. If you’re struggling to find the right insurance policy at the right price, having the expertise of an industry professional can help guide you through the process. Home insurance brokers generally don’t charge customers because they earn a commission from insurance companies, though some do have a broker fee.
What is the 80% rule in homeowners insurance?
The 80% rule states that homeowners should insure their property for at least 80% of its total replacement cost. This ensures that you’ll have enough insurance coverage to repair or replace your dwelling and personal property in the event of a total loss.[3]
What are the disadvantages of insurance brokers?
Working with an insurance broker, instead of buying directly from an insurance company, may limit the discounts you qualify for. While uncommon, broker fees can also add to your total cost.
State Farm. "What is homeowners insurance and what does it cover?."
Stephanie Colestock
Stephanie is a DC-based freelance writer and Certified Financial Education Instructor (CFEI). She primarily covers personal finance topics such as insurance, loans, real estate investing, and retirement. Her work can be found on CBS, FOX Business, MSN, Yahoo! Finance, Business Insider, and more. When she isn't helping people plan for their financial futures, she is traveling, hiking with her kids, or writing for her own website, TomorrowsDollar.com. She can be reached on Twitter @stephcolestock
Edited byKatie PowersAuto and Life Insurance Editor
Katie PowersAuto and Life Insurance Editor
Licensed auto and home insurance agent
3+ years experience in insurance and personal finance editing
Katie uses her knowledge and expertise as a licensed property and casualty agent in Massachusetts to help readers understand the complexities of insurance shopping.
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