Life Insurance Agents: Captive or Independent?

If you are shopping for life insurance, it may be good to know that the agent you get could determine the price you pay. This is due to the difference in product pricing and commissions and whether you choose an independent agent or a captive agent

Types of Life Insurance Agents

There are two kinds of life insurance agent–Captive Agent and an Independent Agent. Both can provide you with the quality expertise that you require to meet your insurance needs. However there are some differences between the two.

• A Captive Agent works for the insurance company for which they are selling. They are limited to the product of that insurance company. For example, if you call a captive agent with MetLife, they will work for MetLife and will sell you only MetLife Products. They are limited in selling you only what MetLife provides as a product—that can be auto, life, financial products, home, etc. Their commission is set by MetLife and they are paid by MetLife. If you need a product or insurance coverage that they do not sell, they would be unable to help you further. Their pricing or rates for their insurance product is set by the company. More often they do not own their book of business. Meaning, if they were to quit, the policies that they have written would stay with the employer/insurance company.
• An independent insurance agent works for himself and not the insurance company. Normally, they provide insurance product for several different companies for which they are appointed. Therefore they can provide you with a quote from several different insurance companies (Progressive, Dairy Insurance, SafeAuto, etc.) allowing you to compare prices. An independent agent gets paid commissions on the policies that he writes by the different insurance companies. Sometimes, there is room for the agent to lower his commission to make the insurance policy cheaper. An independent agent pays all of his or her expenses and therefore has some overhead. Normally, the independent insurance agent owns his book of business (all the policies he has written) and may have a little more leeway in what they can charge you.

Pros and Cons of Captive vs. Independent Life Insurance Agents

After reading above you might say, you can get one stop shopping with an independent life insurance agent. Not so fast! Consider the following pros for each type before you make up your mind:

• A captive agent could provide better pricing. It all depends on the underwriting criteria of the company for the insurance product that you are pricing and the rates for that particular carrier.
• Independent insurance agents drop and pick up difference insurance carriers all the time, and can save you some time by allowing you to get many quotes from different companies.
• If your need is high risk or substandard insurance, there are some captive agents that can’t do this type of insurance at all. The insurance company that they work for does not have a market for this type of risk. In this case, a captive agent may refer you to an independent agent. Same goes for oddity insurance needs such as insuring art work or certain types of commercial insurance. Conversely, there are independents that totally specialize in high risk insurance, providing such things as S-22’s to their clients as well as placing them with the appropriate substandard carrier.
• Some insurance companies only sell through a captive agent. If you have done your research and you know for example that you want the MetLife’s Long Term Care or Life Policy as it has the exact features that you were looking for in a policy, you may have to contact one of their captive agents in order to purchase this policy.

TIP: Which agent you ultimately use is totally based on your needs and your budget. Do your homework! And ask an insurance professional any questions about your options.

If you get a quote from an independent, ask if he is able to lower the rate. It helps to have a comparison quote available showing you can beat his price. Sometimes, independents are able to lower their commission on a policy allowing you to pay less.

To contact an agent in your area that can provide you with a free no obligation quote, click here to use the Free Advice online quote center.

Read more articles to help you understand life insurance by clicking here.

Case Studies: Captive vs. Independent Life Insurance Agents

Case Study 1: Sarah’s Experience With a Captive Agent

Sarah, a 35-year-old working professional, decided to purchase life insurance to protect her family’s financial future. She contacted a captive life insurance agent affiliated with a well-known insurance company. The agent provided her with a policy that seemed suitable but came with a higher premium compared to other options in the market.

Despite feeling uncertain, Sarah proceeded with the policy due to the brand reputation of the insurance company. However, over time, she realized that she could have obtained similar coverage at a lower cost if she had explored other options.

Case Study 2: Mark’s Experience With an Independent Agent

Mark, a 45-year-old business owner, was in search of a life insurance policy that offered flexible terms and competitive rates. He decided to work with an independent life insurance agent who had access to multiple insurance carriers.

The agent took the time to understand Mark’s specific needs and preferences. After comparing various policies from different insurance companies, the agent presented Mark with several options that met his requirements. Mark was able to select a policy with favorable terms and a premium that fit within his budget.

Case Study 3: Emily’s Decision to Consult Both Types of Agents

Emily, a 30-year-old newlywed, wanted to explore all available options before making a decision on her life insurance coverage. She decided to consult both a captive agent and an independent agent to understand the advantages and disadvantages of each.

The captive agent presented her with a policy that aligned with her needs, but the premium was higher compared to the independent agent’s offerings. However, the independent agent suggested a policy from an insurance company that had a less established reputation.

After careful consideration, Emily decided to choose the policy recommended by the captive agent, as she valued the stability and reliability associated with the insurance company.