Brokerage Fee
What Does Brokerage Fee Mean?
A brokerage fee, in the context of insurance, is the amount charged by insurance brokers to clients in exchange for finding insurance policies that offer the most benefits at the lowest cost and for negotiating deals with insurance companies.
A brokerage fee may also be referred to as a broker fee.
Insuranceopedia Explains Brokerage Fee
Unlike insurance agents, who represent the insurance companies, brokers represent individuals seeking coverage. Since brokers typically do not earn a commission from insurers, they charge a brokerage fee to generate income. This fee can be either a flat rate or a percentage of the total transaction. For example, if a broker charges a 10 percent fee, they would earn $200 on a policy premium of $2,000.
Depending on the state, specific regulations and rules govern how agents and brokers can charge for their services. However, disclosing the fee amount is a prerequisite for any transaction.
