Independent vs. Captive Life Insurance Agents: What’s the Difference?

By NerdWallet 
Edited by Amy Danise

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When you're shopping for life insurance, knowing the different types of insurance agent is important as part of understanding how to buy life insurance.

Generally, there are two kinds of life insurance agents — captive and independent. Nearly half of new individual life insurance policies are sold by independent agents, with captive agents accounting for about 41%, direct marketers with 4% and other channels accounting for 6%, according to the most recent figures from the Insurance Information Institute.

A handful of life insurance companies depend exclusively on captive agents, but most rely on independent agents or a mixture of captives and independents. Both types of agents can provide the kind of quality expertise you need to make one of life’s important financial decisions. But there are some big differences between the two.

Captive agents

Captive agents work directly for a single life insurance provider and are limited to the products of that company. For example, if you call a captive agent for State Farm, he or she will market and try to sell you only State Farm products. These agents’ commission, if they have one, is set by their insurance company, and they are paid by that company.

On the plus side, these agents are experts in what their insurance companies have to offer. But they cannot help a client who doesn’t need or qualify for their company’s products. And captive agents usually have quotas to hit to keep their job and earn bonuses. Although that’s not terribly different from independent agents, you might feel a bit more pressure to buy car insurance from a captive agent when all you really want is term life.

Independent agents

Independent agents, meanwhile, work for themselves and not any particular insurance company. They sell policies from a variety of life insurers, not just one, and make most of their money through sales commissions and bonuses from the carriers.

Independent agents can save you some time by getting life insurance quotes from a few different insurers, which could mean a better price. However, they may be less objective than you think. Because they make most of their money off commissions, independent agents may push you to buy a policy that gives them a higher commission — and not necessarily a better deal for you.

Which is best?

The type of life insurance agent you choose depends on your needs and your budget.

If you’re looking for multiple quotes from different companies, an independent life insurance agent probably is the way to go. It can save you time and money.

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