How a Business Insurance Broker Is Paid: What to Ask

Many business insurance brokers are paid mainly by commission: the insurer pays the broker a share of the premium you pay, so you often never see a separate broker bill. Some brokers also charge a fee, and some earn extra from insurers based on volume or profit, so the real answer for your account is whatever the broker puts in writing. This guide is for new owners, including entrepreneurship through acquisition (ETA) searchers and Small Business Administration (SBA) borrowers, who want to settle what to ask about pay before they keep the seller's broker or hire a new one.

The short answer

Commission is the most common route. SBA's small business guide says agents receive commissions from insurance companies when they sell policies, and an industry reference says independent agents are paid by commission or fee.
Fees, flat or hourly, are the other route. Some brokers use fees only, some use commission only, and some use both. Which mix fits depends on the account and the firm.
Extra insurer pay exists: incentive commissions for volume placed, and contingent (profit-sharing) commissions tied to results. Ask whether any applies to your account.
Disclosure rules vary by state. New York and California have written rules. Other states may require less, more or something different, so ask every broker the same questions.
Compare total cost to you, premium plus any fee, for the same coverage. Do not compare premium alone.

How does a broker actually get paid on a business policy?

There are four common ways to be paid, and they often overlap on the same account.

Common broker pay models
Model	Who pays the broker	How it shows up for you	What to ask
Commission	The insurer, generally as a percentage of premium	Usually built into the premium you pay. You may see no separate line.	What do you expect to earn on this policy, and on each alternative quote?
Fee	You, directly, usually under a written fee agreement	A separate invoice or a line on the proposal	What does the fee cover, when is it due, and is it refundable if I leave?
Commission plus fee	Both the insurer and you	A fee on top of premium that already includes commission	Is any commission credited against the fee?
Extra insurer pay (incentive or contingent)	The insurer, after the year, based on volume or results	Invisible on your invoice	Does my account count toward any bonus, and how do you decide which insurers to approach?

Commission is part of what you pay, not an extra. A broker's commission is generally paid out of premium, so the quote you receive normally includes it. Ask each broker to confirm that for every quote, because separate fees and taxes can sit on top. A surplus lines quote, for example, may show state premium tax, which the surplus lines licensee collects and pays to the state, and any fees as separate lines. See surplus lines explained for how that market works.

SBA's small business guide says agents receive commissions from insurance companies when they sell policies. An industry reference adds that independent agents sell policies for one or more insurers. One publicly traded broker's fiscal 2025 annual report (a U.S. Securities and Exchange Commission filing) describes commissions paid by insurance companies as its principal source of revenue, generally a percentage of premium, with fees paid directly by customers as a smaller source. That is one firm's mix, not a market rule, and it says nothing about what any particular policy pays.

Does the insurer pay my broker anything beyond commission?

Yes, it can. Beyond the base commission, an insurer can pay a broker more. The same annual report describes two kinds. Incentive or supplemental commissions are paid based on the volume of business placed with that insurer. Profit-sharing contingent commissions are based primarily on underwriting results, meaning how profitable the broker's book was for the insurer. Profit-sharing commissions are estimated during the year and mostly paid after it ends.

The International Risk Management Institute (IRMI), an industry reference, says contingent commissions are not considered illegal or, given proper disclosure, unethical, but it also calls them somewhat controversial, because they may conflict with representing the buyer's best interests. Treat that as a fair summary of the debate rather than a verdict on any firm. The practical response is a question, not an accusation:

Does any insurer pay you more for volume or results?
Would my account be placed with an insurer that pays you extra, and how do I know the choice was made on fit and price?
If a wholesale broker or managing general agent (MGA) sits between you and the insurer, who is paid, and out of what? A wholesale broker is an intermediary with no contact with you. An MGA is an agent that holds underwriting authority from an insurer. Ask whether their pay is inside the premium you see or shown separately.

See retail broker vs wholesaler vs MGA for who does what.

What does a broker have to tell you about pay?

It depends on the state. Disclosure rules are set state by state, and there is no single national rule that this guide could confirm, so do not assume a broker will tell you unless you ask. Two states have written rules worth knowing, and they show a useful set of questions.

New York, what the producer must say. Under the state's compensation disclosure regulation (Insurance Regulation 194), a producer (the licensed person who sells the policy) selling an insurance contract must describe its role in the sale, say whether it will be paid by the insurer or a third party based on the sale, and state that pay may vary with the contract, the insurer, volume or profitability.
New York, what you may ask for. The buyer may ask for the compensation the producer expects on the sale and on any alternative quotes, and the producer then gives it in writing, with a reasonable estimate or range if the amount is not yet known.
New York, exceptions. Renewals are generally outside the rule, although a buyer who asks within 30 days before or after a renewal gets the written information within five business days. A producer with no direct sales contact with the buyer, which the rule says may include a wholesale broker or managing general agent, is also outside it.
California. Insurance Code section 1623 presumes a license holder is a broker only if the person is bonded and signs a written agreement with the buyer that says the broker is transacting insurance for the buyer, lists the basic services, states the amount of all broker fees and says, where applicable, that the broker may be paid by the insurer. It covers certain admitted-market business outside life, disability and health. This is a condition of the broker presumption, not a general commission disclosure rule, and it does not apply the same way to agents appointed by an insurer.
Other states. Rules differ, and this guide does not cover them all. Ask your state insurance department what applies, and ask your broker anyway.

If you hold a Small Business Administration 7(a) loan, one related rule is worth knowing. Under SBA's lender policy manual, a lender and its associates may not require you to pay the lender, an associate or a party the lender designates any fees or charges for goods or services, including insurance, as a condition of the loan. That rule is about fees and charges tied to the loan. The policy manual text reviewed does not address which agent you pick, but your lender's own requirements may, so ask for the document in writing and confirm with deal counsel. See lender-recommended agent vs your own broker.

Is commission or a fee the better way to pay a broker?

Neither is better in every case. Each has trade-offs a new owner should weigh against the business they bought.

Trade-offs of each pay model for an acquired company
Question	Commission-based	Fee-based
Cash flow	No separate bill; cost sits inside premium and moves with premium	A visible line item you can budget and show investors
Incentive to act	Income rises with premium, so ask how the broker treats a request to cut cost, such as raising a deductible	Income does not rise with premium, but ask what happens when you need more work than the fee covers
Transparency	Needs a direct question to see the amount	Written in the agreement by design
Complex or multi-entity accounts	The commission may or may not match the time a roll-up needs	Can fund added service, reporting and project work
Switching	Compensation can move with the policy when you move the account to a new broker (a broker of record change), depending on the insurer	Fee terms and refunds follow your contract, not the insurer

Two points for an acquirer. If you bought the company's stock, a written fee or service agreement the seller signed with its broker may still bind the company. Ask for a copy and have deal counsel read the term and the exit clause. And rules on broker fees, and on whether a fee is refundable, can vary by state and by agreement, so read the fee agreement before you sign and ask your state insurance department what applies.

A related option is a fee-only advisor who does not place coverage. Licensing for that role varies by state. New York, for example, licenses insurance consultants separately. See insurance consultant vs broker.

Budgeting matters too. A fee is an operating cost you can put in the model. Commission is already inside the insurance line. Moving from commission to a fee may shift cost between lines, and whether the premium drops by the commission amount depends on whether the insurer offers a price net of commission, so ask. Ask your accountant how to present it. See budgeting insurance in your acquisition model.

How do you compare two brokers on pay?

Ask every broker the same written questions and put the answers side by side. A reasonable list:

In this sale, are you acting as a broker for me or as an agent for an insurer, and do you have authority to bind coverage with any insurer you will quote?
Will the insurer pay you, will I pay you, or both?
Does what you earn vary by insurer, by volume or by profitability?
What would you earn on each alternative quote you show me?
Do you or an affiliate have any ownership interest in an insurer you are quoting, or the reverse?
What fees apply beyond commission, and which are refundable?
If I leave mid-term, what happens to my fees and to the servicing?

If you are still choosing a broker, how to run a broker selection process explains why many buyers compare pay terms first and compare premiums after one broker is chosen.

A hypothetical example. Once a broker has brought quotes for the same coverage from two sets of insurers, or you compare two proposals the seller's broker and a new broker have each built, the buyer compares them line by line. Broker A quotes $100,000 in premium and no separate fee. Broker B quotes $96,000 in premium plus a $5,000 service fee, so the total is $101,000. The buyer first confirms that limits, deductibles and endorsements match line for line. Then the buyer asks each firm the questions above and compares service in writing: who handles certificates, how fast, and how claims are supported. The lower premium line did not mean a lower total, and total cost is only one input.

The full set, with what good answers sound like, is in questions to ask an insurance broker after buying a business. For warning signs see red flags in an insurance broker, and for choosing among firms see how to run a broker selection process. Also see the difference between a broker and an agent.

Where does Morrow fit?

Morrow is the brand of Afthonea Inc., a licensed insurance agency in Boston that focuses on business insurance. It can review inherited policies, flag gaps and request quotes. Put the seven questions above to Morrow as you would to any broker, and ask for the answers in writing before you sign anything. Morrow does not issue policies or decide coverage, and any terms depend on carrier underwriting. A quote request is not bound coverage. Morrow is licensed in Arizona, California, Colorado, Florida, Georgia, Illinois, Louisiana, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas and Virginia only.

You may be better served elsewhere if your business is in another state, if you want a fee-only advisor who does not place coverage, or if you need life, disability or health benefits advice or a very large complex program. Confirm any broker's license on your state insurance department lookup before you sign.

Keep reading

Frequently asked questions

Do I pay my insurance broker directly?

Often not. Many brokers are paid by the insurer out of the premium, so the quote already includes their commission. Some brokers also charge a fee, which should be in a written agreement. Ask each broker to say in writing whether you will pay it, the insurer will, or both.

Is it normal for a broker to earn more if my premium goes up?

Commission generally tracks a percentage of premium, so income can rise with premium. That does not mean advice is poor. Ask how the broker handles requests that would lower premium, such as higher deductibles, and look for a clear answer with the trade-offs explained.

Can I ask a broker how much they earn on my policy?

Yes. In New York, a buyer may generally ask for the compensation expected on the sale and on alternative quotes, and the producer must then answer in writing unless an exception applies, such as a renewal or a producer with no direct contact with the buyer. Other states differ, but asking is reasonable anywhere. A broker who explains pay plainly is showing the kind of openness you want.

What is a contingent commission?

It is extra money an insurer pays a broker based on the profitability of the business the broker placed. An industry reference says it is not considered illegal or, given proper disclosure, unethical, and also calls it somewhat controversial. Ask whether your broker receives any and how it is disclosed.

Does a broker fee mean I am paying twice?

Not necessarily, but ask. A fee on top of commission can be fair for extra service, and some agreements credit commission against the fee. Get the answer and the refund terms in writing, then compare total cost to you for the same coverage.

Will my broker's pay show up as its own line in my model?

Often not. Commission sits inside the premium, so your insurance line already includes it. A fee is a separate cost. Moving from one to the other may shift cost between lines, so ask your accountant how to present it.

References

Just bought a business? Get your insurance reviewed.

Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.

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This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.

How Insurance Brokers Get Paid: Commissions, Fees and Disclosure