Captive Agent vs. Independent Agent

If you’re thinking about becoming a licensed agent in life, health, or property and casualty insurance, first consider how you want to operate in the insurance industry. Aside from choosing the products you want to sell, you’ll also need to decide which of the two main types of insurance agents you want to be: captive or independent.  

After you’ve earned your license, you will need to be appointed by an insurance company to have authorization to sell its insurance products. But before you select which company – or companies – you want to work for, it’s important to understand the difference between a captive agent and an independent agent and which type will align with your desired lifestyle. 

Which is Better?

These two roles can look quite different, so deciding which is “better” is really up to you. Below, we’ve listed some pros and cons for both types of insurance agent.

What Is a Captive Insurance Agent?

A captive insurance agent, sometimes called a dedicated agent, will work for only one insurance company and solicit only that company’s products. They may be considered full-time employees or independent contractors, but they will specialize in – and have in-depth knowledge of – the products. Captive insurance agencies are typically large, national-scale companies.  

Pros of Being a Captive Agent

The start-up costs of a captive agent can be nonexistent. Captive agencies support their agents with administrative tasks, staffing of multiple departments, and office space. Some agencies may reimburse an agent-in-training for their pre-licensing education and licensing exam fees. A captive insurance agent is paid by the captive agency, usually with a base salary, commissions, and benefits.  

Large-scale marketing is also provided by the parent company. Clients seek out the company based on brand recognition, which can pre-establish a client’s trust. Agents may choose to do their own marketing, but it really isn’t necessary to earn business.  

Cons of Being a Captive Agent

Because captive agents are bound to one insurance carrier, they may offer customers coverage options from only that carrier. For that reason, selling the products may not always be in the best interest of the client. Captive companies can place sales quotas on their agents, and a captive agent’s ultimate goal is to sell the company’s policies. At the end of the day, clients may have specific insurance needs that cannot be met with the parent company’s available policies. 

When compared to independent agents, the commission rate a captive agent receives is lower. This is because captive agents also receive a base salary and benefits.  

Depending on the company, captive agents may be required to sign noncompete contracts. If you become a captive agent and decide to leave the company, you may have to wait a specific amount of time before you can work at another insurance company or as an independent agent.

What Is an Independent Insurance Agent?

Independent agents may be appointed by multiple insurance companies. They may be self-employed or work at an independent insurance agency or brokerage.  

They may sometimes be confused with insurance brokers, since brokers also search for policies in the clients’ best interest. The difference is that an agent has the authority to officially bind a policy between an insurance company and client, where brokers do not have that authority.

Pros of Being an Independent Agent

Independent agents have access to all policies of any insurance company they work for. So with more coverage options, they can search for policies that best suit their clients’ needs. Finding clients the most suitable policies has an additional benefit – independent agents make higher commission per sale than captive agents. When compared to captive agents, independent agents have a much higher earning potential. 

As an independent agent, you also have control over your work hours. Many independent agents have chosen to forgo the office and work from home. If it suits your lifestyle, you can choose to work part-time. Many part-time agents make a salary competitive to a regular 9-to-5 office job. Or you can use insurance sales to create an additional source of income and say good-bye to other sketchy side hustles.  

Cons of Being an Independent Agent

Independent agents may receive higher commissions than captive agents, but this commission is also their only source of income. It is common for individuals to keep another job while they are starting out as an independent agent, meaning you may need to initially work more than 40 hours a week.  

Independent agents must also create their own marketing plans and build trust among clients. Unlike captive agents, independent agents do not receive support from brand awareness. Building up client referrals may take time and effort. An agent that is new to the game may struggle to pay bills as they are building their network. 

Independent agents may see more up-front costs and risks than captive agents, especially if they’re opening their own business. You will have to manage your book of business, hire additional employees if needed, and account for rental costs if you need office space. 

The Bottom Line

Becoming an insurance agent has the potential for lucrative earnings, whether you want to go the captive agent or independent agent route. Before making your decision, it’s important to weigh the options and figure out what fits best with your lifestyle. No matter which path you choose, there are steps you can take to grow and become successful in the insurance industry. Once you’re ready to get started, we have interactive prelicensing education that can support your learning. And once you’re up and running as an agent, we have continuing education courses to help keep your industry knowledge up-to-date and your license active.