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How do insurance brokers get paid?

Insurance Brokers

When deciding to work with Denver Insurance Brokers, you are choosing to work with a professional that will be the middleman between you and an insurance company. Your broker will help you to find a policy that best suits your needs because they are your advocate. It is good to know that the insurance broker cannot bind coverage. This means that they will need to turn your case over to an insurance agent to complete the sale.

How Do Insurance Brokers Get Paid?

An insurance broker will obtain their payment based on commissions from selling insurance. This can be done to either individuals or businesses. Most commissions are between 2% and 8% of your yearly premium. Depending on state regulations, brokers sell all insurance types. This might include health insurance, homeowner insurance, accident insurance, life insurance, annuities.


The primary way an insurance broker earns money is by commissions and fees. These commissions are always based on the annual premium the policy is sold for. After the income is earned, the premium is income for the insurance company. This also gives liability to the insurer. As the insurer, they are required to take care of claims being made against the policy.

Then, insurers use premiums to cover liabilities associated with the policies they underwrite. Premiums must also be invested to generate higher returns, but also to offset the costs of providing insurance coverage. This helps keep the prices down.

Representing Clients

Insurance brokers are supposed to represent the best interest of the clients. This means that your needs as a client, your situation, and your requirements should be taken into consideration. Your policy should also be within your budget. Studies show that many people choose a less than optimal plan when based only on their judgment, rather than a professional.

Should Not Favor One Company

Because insurance brokers are well-versed in offerings from all insurance companies, brokers should not push you towards choosing one specific company. This is one reason why brokers are paid a commission instead of being paid by the insurance company. This keeps the playing field fair.

Responsibility to Navigate the Insurance World

When you hire an insurance broker, they have an important responsibility to help you navigate between insurance plans. Although many of these plans have subtle differences, they can be a world of difference. After the plan is paid for, the broker will also be able to provide consulting services to help determine whether policies should be changed, and to provide assistance with compliance. In the event something occurs, they can also help submit claims and receive benefits.

Insurance Regulation

To stay up to date with changing regulations, your insurance broker should help you. Brokers are licensed by the state insurance regulatory agencies which require them to stay in compliance and renew their license on a biannual basis. Then, they should regularly meet with their clients and determine that your current policies meet your needs.

What to Remember

  • When you hire an insurance broker, they work directly for you.
  • Insurance agents work for a specific insurance company.
  • Purchasing insurance can be difficult, and an insurance broker will do the research for you to choose a policy.

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