April 25, 2024
Learn how insurance brokers make money, including their commission-based earnings, fee-based advisory services, and value-added services. Understand the different options available and the potential benefits and drawbacks for clients.


Insurance brokers are professionals who help clients find the best insurance policies to meet their needs. But how do they make money? Many clients are unsure whether brokers work on a commission basis, or if they earn fees for their services. In this article, we will explore the different ways insurance brokers make money, so you can better understand their business model and how it may affect your insurance options.

Commission-based earnings

One of the most common ways insurance brokers earn money is through commissions. This means that brokers receive a percentage of the premium paid by a client when they purchase a policy through them.

The commission percentage can vary depending on the type of policy and the insurance company involved. For example, a broker may earn a higher commission for car insurance policies than for home insurance policies, due to differences in pricing and regulations. Here are a few typical commission rates for various policies:

  • Auto insurance: 10-15%
  • Life insurance: 50-100% of the first year’s premium
  • Homeowner’s insurance: 10-20%

However, relying solely on commission-based earnings can create potential conflicts of interest for insurance brokers. Some may be motivated to sell policies that offer higher commissions, even if they may not be the best fit for the client. This can lead to clients being pushed into policies that may not be optimal for their needs, leading to higher premiums or inadequate coverage.

Fee-based advisory services

Another option for insurance brokers is to offer fee-based advisory services. This means that clients pay a set fee for the broker’s expertise and advice, rather than the broker earning a commission on the policy sold.

Fee-based services can offer a more transparent pricing structure for clients, as they know exactly how much they will pay for the broker’s services. Additionally, brokers may be motivated to provide advice that is in the best interest of the client, rather than being swayed by commissions.

Examples of fee-based services that insurance brokers may offer include risk assessments, claims management, and ongoing policy reviews and recommendations. These can be beneficial for clients who want a more comprehensive approach to their insurance needs.

Value-added services

Insurance brokers can also make money by offering value-added services to clients. These are additional services that go beyond the basic insurance policy, such as risk management or claims assistance.

By providing these services, brokers can differentiate themselves from competitors and provide additional value to clients. Some brokers may charge a separate fee for these services, while others may include them as part of their overall service offering.

Examples of value-added services that insurance brokers may offer include:

  • Risk management assessments and recommendations
  • Claims advocacy and assistance
  • Employee benefits consulting

Offering value-added services can be beneficial for clients, as they may be able to receive additional support and assistance beyond what is typically provided by an insurance policy alone.

Referral fees

Referral fees are another way that insurance brokers can earn money. This involves referring clients to other businesses or services, such as car dealerships or home repair companies, and receiving a commission or fee for the referral.

However, this practice raises potential conflicts of interest, as brokers may be motivated to refer clients to businesses that offer the highest fees, rather than those that are truly the best fit for the client.

If your insurance broker offers referral services, be sure to ask about how they select the businesses they refer clients to, and whether they receive any monetary compensation for these referrals.

Incentive programs

Insurance companies may offer incentive programs to brokers as a way to motivate them to sell more policies. These programs may include sales targets, bonuses, or volume rewards for reaching certain thresholds of policies sold.

While these programs can increase brokers’ earnings potential, they can also create potential conflicts of interest. Brokers may be motivated to sell more policies to earn bonuses, even if those policies may not be the best fit for their clients’ needs. Additionally, clients may feel pressured to purchase policies they may not need, solely to help their broker reach sales targets.

Impact of insurance rates

Insurance rates can have a significant impact on brokers’ earnings. Higher rates may result in higher commissions for brokers, but they may also lead to higher premiums and potentially fewer clients willing to purchase insurance.

Additionally, insurance rates can vary by region and policy type. Insurance brokers who specialize in certain types of policies or regions may be more likely to experience fluctuations in their earnings based on these factors.

Industry specialization

Some insurance brokers choose to specialize in particular industries, such as healthcare or auto insurance. This can allow them to develop expertise in a specific area, which can be beneficial for clients looking for specialized insurance solutions.

Specialization can also help brokers differentiate themselves from competitors and build a reputation as an expert in their field. This can result in more referrals and repeat business from satisfied clients.


Understanding how insurance brokers make money is an important factor to consider when selecting an insurance policy. By understanding the different ways brokers earn money, you can make more informed decisions about the policies you purchase and the brokers you work with. Whether you prefer commission-based earnings, fee-based services, or value-added services, it’s important to discuss your options with your broker and select a strategy that will work best for your needs.

Remember that every broker may have different fee and payment structures, so it’s important to understand how your own broker operates. By asking questions and staying informed, you can make the best decisions for your insurance needs.

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