How do insurance brokers make money?

Insurance brokers earn commissions paid by insurers, typically a small percentage of the annual premium, and they may charge fees for consultative or advisory services. States govern when those fees are allowed, and several restrict non-commission fees to written agreements for financial-planning or consulting services. Brokers represent the insured rather than the insurer and cannot bind coverage; an agent or the insurer must complete the sale. Some insurers also pay bonuses or higher commissions to high-performing brokers.

Insurance agents and brokers earn commissions paid by insurers on the policies they sell. Captive agents work exclusively for one company and earn salary plus bonuses, while independent agents contract with several companies and earn commissions on their sales. Brokers differ in that they represent clients rather than insurers, but they are also paid through commissions on the coverage they place.

Insurance brokers make money through commissions paid by insurers when they place a policy. First-year commissions commonly run about 5% to 10% of auto and home premiums for captive agents and about 15% for independent agents. Life insurance pays more on first-year premiums, often 40% or more, while renewal commissions are much smaller.