Short answer
How insurance brokers get paid depends on the policy and the carrier. Most are paid through commission built into the premium, a separate broker fee, or both. Your final bill can also include surplus lines taxes, carrier fees and a minimum earned premium. Ask for a full breakdown of every line before you bind, so you know what you are paying and why.
How insurance brokers get paid through commission
Commission is a percentage of the premium that the carrier pays the broker for placing the policy. You do not write a separate check for it. It is already inside the premium you see on the quote.
Commission levels vary by carrier, policy type and state. A carrier that writes a specialty policy for architects and engineers may pay a different commission than one that writes a standard business policy.
Broker fees and policy fees
Some brokers charge a fee in addition to commission, or instead of it. A broker fee compensates the broker for the work of placing and servicing the policy. A policy fee is a charge the carrier or broker adds to cover administrative costs.
State rules on these fees differ. Some states require disclosure on the quote or require the fee to be agreed in writing. If a fee appears on your quote, ask what it covers and whether it is refundable if you cancel.
Wholesale brokers and MGAs
Many professional liability policies for architects and engineers reach your firm through more than one intermediary. Your retail broker may work with a wholesale broker, which is a specialist that has direct access to carriers. A retail broker deals with you, and a wholesale broker deals with carriers.
You may also see an MGA, or managing general agent. An MGA is a company that carriers authorize to quote, bind and service policies on their behalf. Each party in the chain may be paid through commission, fees or a share of the premium. That structure is common in specialty insurance and does not mean the price is inflated, but you should know who is involved.
Surplus lines taxes and fees
If your policy comes from a non-admitted carrier, your state may charge surplus lines taxes and fees. These are separate from the premium and usually appear as their own line on the quote. The broker collects them and sends them to the state.
The amounts vary by state, so a policy that costs the same in two states can have a different final bill. Ask your broker which taxes and fees apply to your policy and whether they are included in the quote total.
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Get a Quote →What a minimum earned premium means
A minimum earned premium is the portion of the premium that the carrier keeps even if you cancel early. If a policy has a 25% minimum earned premium, for example, the carrier keeps at least that share no matter when you cancel.
Some policies are fully earned at inception, which means the carrier keeps the entire premium once the policy begins. Always check this before you bind, especially if your firm may close, merge or switch carriers during the year.
An illustrative sample breakdown
The numbers below are fictional and rounded. They show how a quote can be structured, not what any policy will cost.
| Line item | Example amount |
|---|
| Base premium (includes commission) | $10,000 |
| Broker fee | $500 |
| Surplus lines taxes and fees | $400 |
| Total due | $10,900 |
In this example, the base premium already contains the broker’s commission. The broker fee and taxes sit on top. Your quote may have more lines, fewer lines or different ones.
How Hardcover is paid
Hardcover is an insurance brokerage, so we are paid for placing and servicing your coverage. How that works can differ by policy and carrier. We will show you how we are paid on each quote, and you can always ask us to break down any line before you decide.
Questions to ask before you bind
- Does the quote include commission, a broker fee or both?
- What does each fee cover, and is any of it refundable?
- Is the carrier admitted or non-admitted?
- If it is non-admitted, which surplus lines taxes and fees apply?
- Is there a minimum earned premium, or is the policy fully earned?
- What is the total amount due, including taxes and fees?
- Who else is involved in the placement, such as a wholesale broker or MGA?
Do I pay my broker directly?
It depends on the quote. Commission is built into the premium, so you pay it through the carrier’s price. A separate broker fee appears as its own line, and you pay it with the policy.
Does a higher commission mean a higher premium?
Not always. Commission is one part of the premium. Carrier pricing, your revenue, your discipline and your claims history all affect the total. Compare the full cost of each quote, not only one line.
Why does the final bill differ from the quote I first saw?
Taxes, fees and installment charges can change the total. A quote may also list the premium first and add other items below. Ask for the total due before you agree.
Can I negotiate a broker fee?
Sometimes. Fees vary by broker and policy, and some are set by the carrier. It is reasonable to ask what the fee covers and whether it can be adjusted.
Is a fully earned premium the same as a nonrefundable premium?
Usually, yes. A fully earned premium means the carrier keeps the entire amount once the policy takes effect. Confirm the exact wording in your policy and quote.
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