Independent vs. Captive Agents

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    When you’re in the market for insurance, whether it’s home, auto or life, you typically work with a representative who can help you find a policy that meets your needs. But most people don’t know that there are two different kinds of insurance agents—captive and independent.

    So what is an independent insurance agent vs. a captive insurance agent? In short, captive insurance agents are contracted to work for one insurance company and can only sell that company’s policies. On the other hand, independent agents are contracted to work with a variety of insurance companies and can sell policies from multiple providers.

    As a consumer, it’s important to understand the distinctions between captive and independent agents. Although they sound the same, some people will benefit from working with a captive agent and others with an independent agent. In this article, we’ll explain the key differences and help you decide which agent is best for you

    Captive agents

    Most of the major insurance companies, like State Farm, Allstate and Farmers, use captive agents to sell their insurance products. Their agents are only selling policies from that one insurer, so the agents are experts at knowing the different policies available, discounts and coverage add-ons.

    Because of that, the biggest benefit to working with a captive agent is that they can help you find the best policy to meet your needs. That can be helpful for people who are buying insurance for the first time or for people who aren’t sure how much coverage to purchase.

    Captive agents also receive support from the insurance company they represent. Sometimes they are given an office and even a staff to help them file paperwork. Besides helping clients find and purchase insurance policies, captive agents invest their time networking with new clients and building relationships with existing customers. Because of that, a captive agent might provide a higher level of customer service.

    Client satisfaction is crucial for captive agents because they get a commission for every earned sale. However, their commission rate tends to be lower than for independent agents because they are also paid a salary from the insurance company and get financial assistance with costs like advertising and hiring.

    Independent agents

    Independent agents partner with several insurance companies of their choosing to sell certain policies from each provider. For example, an independent agent might contract with Trusted Choice and Safeco and only sell their auto and home insurance policies. That agent is not eligible to sell policies from another company, like Geico.

    Many consumers like working an independent insurance agent because an independent agent gives the customer more options. They aren’t locked into purchasing from a small number of plans that might be too expensive or not a great fit for their coverage needs. Those options help people shop around for plans before settling on one.

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    Unlike captive agents, independent agents are responsible for their own overhead. Essentially, becoming an independent agent is like starting any other business. You need an office space, computer setup, filing system, advertising strategy and an administrator. The independent agent has higher startup costs, and they are responsible for paying 100% of their business fees.

    However, independent agents tend to have more opportunities when it comes to earnings. Although they work solely on commission from closed sales, their commission percentage tends to be much higher than for captive agents. It’s also common for independent agents to form insurance agencies, which can help control business expenses.

    Which is better: independent vs captive agents?

    Generally speaking, there isn’t one better type of insurance agent. Whether you choose to work with a captive agent or an independent agent depends on your needs.

    The main benefit of working with a captive agent is that they have extensive knowledge of their insurers products and policies. Before investing in insurance, you want to select the right plan, and a captive agent can help you do that. However, working with a captive agent tends to be more expensive, due to extra fees that the insurance company charges.

    With independent agents, the pros and cons are somewhat the opposite. If you work with an independent agent, you’ll get more options, which also means a wider price range. But independent agents lack the in-depth knowledge that captive agents have because they are spread thin across multiple policies and providers. However, independent agents usually charge less because there isn’t one parent company to support.

    If you’re purchasing insurance for the first time or need help understanding the policies available to you, consider working with a captive agent. They’ll be able to find a good match for you based on your specific needs and budget. If you’re mostly concerned with keeping costs low, working with an independent agent will save you money. Keep in mind that you should already have a general idea of what you’re looking for before meeting with an agent.

    Frequently asked questions

    Both independent and captive agents can sell any kind of insurance they want. Some choose to sell every product that an insurer offers, while others specialize in a few areas, like home and life insurance.

    There are a few main reasons why you would choose an independent vs. a captive agent. The first is cost—working with an independent agent will be cheaper than working with a captive agent. However, captive agents are generally better for people who need assistance throughout the insurance purchasing process. They tend to have more knowledge of the insurance products of a specific company than an independent agent does. Lastly, independent agents can offer a wider variety of plans, so you have more choices and a wider price range to work from.

    To find an independent agent, try searching for local agencies in your area. From there, you’ll be able to see which insurance providers are represented. Or, try asking for a recommendation from close friends or colleagues you trust. You can also search this database from Big I, the Association for Independent Insurance Agents & Brokers of America, for independent insurance providers near your zip code.

    Elizabeth Rivelli

    Contributing Writer

    Elizabeth is a contributor to The Simple Dollar, where she reviews insurance providers and policies. She has more than three years of experience writing for top online insurance and finance publications, including Bankrate, and