To most people, insurance agents are a dime a dozen. There isn’t much difference between this one and the next. But this couldn’t be further from the truth. For those who are looking to get the most value out of their insurance policies, it is crucial to understand the difference between independent and captive agents.
Independent Insurance Agents
Independent agents take your personal information and will shop your needs to a few different insurance companies. They will provide a couple of quotes from different companies that provide various coverage and rates. Let’s say you are in the market for a new car insurance policy. Your independent agent provides you with competing rates from different companies:
Company 1: $637/year
Company 2: $775/year
Company 3: $656/year
Your agent would then explain the pros and cons of each policy and work with you to determine which one best covers your needs. In addition to this obvious advantage, independent agents routinely have access to special marketing programs from some insurance companies, which often lead to reduced rates. Another perk of an independent agent is the variety of coverages they can provide, since they work with different companies who have different coverages. Many people have very specific needs for their insurance policies, and independent agents are especially equipped to meet these needs. The independent agent ensures that you are getting the best possible rate each and every year.
A captive agent typically works only for a single company and can sell insurance only for that company. This means that the type of insurance offered from a captive agent is generally limited and you will be quoted insurance from that company only. After determining your needs, a captive agent would provide you with a single quote from their parent company.
While there are advantages to both, it is important to find an agent who can fit your needs. Independent agents have an advantage when it comes to rising rates, as they are free to shop around at different companies to stay in their customer’s price range. And while many captive agents can offer initial savings, that policy is subject to rising rates since they cannot offer any alternatives.