Independent Agent vs. Captive Agent

independent vs. captive

There are many ways to purchase an insurance policy these days, whether it be online, over the phone, or in person.

Ultimately, you will obtain insurance directly from an insurance company or through a licensed insurance agent.

To drill down even more, there are multiple types of insurance companies and insurance agents to choose from.

For the purpose of this discussion, we’re going to look at the benefits of using an independent agent vs. a captive agent.

In this day and age, it’s all about choices and options. This is where the value of an independent agent comes to light. Put simply, they have the ability to offer more choices than a captive agent.

Independent agents represent, in some cases, over 100 insurance companies.

This means they can look at your personal situation and shop your needs with several dozen insurers to make the best recommendation for you.

Each insurance company will have different rates, liability limits, and in some cases, coverage types, so it’s important to look at them all.

Additionally, one insurer might have spectacular pricing in your area that is much lower than the competition.

And you may never know that because it could come from a company that doesn’t advertise much or at all.

Let’s look at an example of a potential insured shopping with both an independent agent and a captive agent.

Independent Agent:

You visit your local independent agent armed with the necessary personal information to obtain a car insurance policy.

After answering all of the questions needed to properly fill out an application, the agent “shops” your application to three different companies that typically accept risks of your nature.

Here are the potential results:

Company A: $750 for a one-year policy
Company B: $918 for a one-year policy
Company C: $430 for a six-month policy ($860 for one-year of coverage)

Assuming the limits and coverage types are similar, your agent may recommend Company A, as that policy would save you $110 over the course of one year.

If you agree and proceed, the agent will bind your policy and you will be covered.

Captive Agent:

In contrast to the example above, let’s look at the captive insurance agency. By nature, a captive agent only sells insurance for a single company.

An example of a captive agent would be State Farm. All of the steps would be the same, up to the point where you receive your quote.

State Farm: $814

As you can see, State Farm is not the highest priced policy versus the independent agent’s options. In fact, they are cheaper than two of the three.

Here is where you will be limited though. The captive agent is not going to offer you any more quotes. They don’t have the option to do so.

If this were the only place you shopped for insurance, you would be led to believe that this is the best rate available to you. You would be overpaying for the same coverage by $64 compared to Company A offered by the independent agent.

Independent agents may also have a leg up on the renewal process as well. Imagine in the example above that State Farm was the least expensive policy when you purchased coverage.

What would happen the following year when your policy renewed? It’s possible State Farm had to increase their rates.

If you called your agent to see about getting another insurance quote, you’d be out of luck. They can only sell you a policy from their company.

You will likely hear “rates are going up everywhere because of the economy.” Take a break to roll your eyes if you’ve already heard that one before.

Additionally, I’ve personally heard stories where captive agents offer to reduce coverage as a means to lower your premium. You should never reduce your insurance coverage solely as a means to lower your premium unless you are out of other options.

Any agent who suggests this because THEY don’t have other options for you is not looking out for your best interests, they are looking out for their own checkbook!

Of course, the odds your agent would tell you to shop with another company are nil, as they would not receive a commission from that sale.

On the flip side, what if your policy premium goes up with an independent agent?

Well, the independent agent has the ability to “re-shop” your rate with any of the companies they represent and move your policy if necessary.

The independent agent can ensure you’re getting the best deal available each and every year.  Just make sure your independent agent binds your policy with a stable, highly rated insurer.

There is something to be said for service. I’ve heard complaints about service from both large captive agent companies and companies who use independent agents to sell their product.

Don’t let anyone convince you that if you don’t go with one of the well-known national carriers that you’re risking anything. It simply isn’t true.

Every insurer operating in every state is watched by an associated State Department of Insurance to ensure their business practices are up to snuff.

Don’t let a multi-million dollar national advertising campaign be your only guide for information regarding your insurance choices.

Looking for health insurance quotes?
Or homeowners insurance quotes?
Or life insurance quotes?


  1. Annabelle September 21, 2017 at 8:22 am -

    I am wondering – is PRICE SHOPPING the only advantage to an independent? Wouldn’t them price shopping for me lower their income – how do I know they’ll do this? What are other advantages NOT related to PRICE that an independent would offer?

  2. Staff September 23, 2017 at 9:35 pm -


    It’s possible they’ll earn a high commission with a company that also offers you a low rate. The advantage is they can shop for you, and ideally be knowledgeable about insurance unlike say a customer service rep. And if you don’t believe them, you can always go do your own diligence as well. Either way, if their quote beats what other companies are offering you, it’s still a win, regardless of whether they hide an even cheaper company that may not pay them as much, not that they’d necessarily do that.

  3. Tannya Cluff September 27, 2017 at 1:14 pm -

    I’m an Independent Agent in Idaho. Other benefits of using an independent agent are: We work for our clients, not the insurance carriers. It is beneficial to agents to continually shop for lower rates because even if we do get less of a commission, it is still better to keep the client and it helps build trust and loyalty. We have a broader product knowledge of what is available in the market and recommend more coverage options. Independent Agents can provide advice and knowledge on various coverage & policy options. If one of a clients policies is unfavorable to a certain carrier, they have the ability to place that policy as a stand alone policy with another carrier. Lastly, we can deal with that agent during any situation that arises, rather than just calling a service center. Independent Agents build relationships with their clients and are in it for the long haul.

Leave a Response