Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Written by Shuman Roy
Content Writer & Entrepreneur Shuman Roy

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Jun 28, 2022

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How many times have you heard the phrase, “Call your local Allstate Agent,” or “Contact Progressive Direct today?”

And what about the quintessential “Crazy Eddie” type independent agent who tells us “All insurance companies are stupid!”

People looking for insurance should be seeking help from insurance professionals to make sure they’re getting the insurance coverage they need at the right price. However, the type of insurance agent could make a difference in the results you get.

You may be wondering what the real difference is between these types of insurance agents? Which one should you consult when you need coverage?

Well, while there are many variations to these models, it usually boils down to one of the following scenarios.

Either you purchase insurance directly from an insurance company or through a captive or independent agent.

Can you purchase directly or via an insurance agent?

Below we highlight the most common channels to help you make an informed decision.

Similar to any other financial institution, insurance companies typically specialize in servicing predetermined groups of people, so it’s important to know where you fit in to this equation.

Tip: The greater the number of companies an agent is capable of working with, the greater the number of different quotes you can compare prior to choosing an insurance company.

“Captive” or “Exclusive” Insurance Agent – This type of agent represents a single insurance company or a specified group of insurance companies, meaning they can only offer you one quote, or price, for an insurance policy.

These agents are easily identified, as the sign in front of their building is typically the name of a large insurer. These large insurance companies are typically advertised nationally on television.

Captive insurance agents are generally not employees of the insurance company they represent.

These agents are paid a commission (or percentage) of the total price of your policy by the insurance company they place you with.

Insurance agents act as intermediaries providing prospects with the necessary information from the insurance company or companies they represent. They’re familiar with the type of policies they’re allowed to sell, and how much money you should pay for these policies.

Well known examples of captive agents or exclusive insurance agents include Allstate, Farmers, and State Farm.

For example: If the total cost of your automobile insurance policy for one year is $1,000, and the agent is paid a 12% commission by the insurance company, the agent will earn $120 for selling you the policy.

The agent also gets a specified commission percentage if your policy renews with the same company.

Typically, “renewal” commission is equal to or less than new business commission because less work needs to be done to renew a policy. An independent insurance agent is paid the same way.

“Independent Agent” – Independent insurance agents represent as few as one insurance company or up to several dozen insurers.

An independent insurance agent is able to shop your insurance rate with all of the insurance companies they represent; similar to how a mortgage broker can shop your loan around with multiple lenders.

Independent insurance agents do not generally advertise nationally, nor do the companies they represent.

Independent insurance agents are not employees of the companies they represent.

These agents are also paid a commission (or percentage) of the total price of your policy by the insurance company they place you with.

There aren’t any specific examples of these types of agents you would be aware of by name recognition, as they can be as unique as an individual agent’s name.

So you may see something like, “Bob Johnson Insurance agency”, “Access One Insurance”, or “National Insurance Company of Texas”.

For the record, don’t let a “dot com” at the end of a name confuse you. Some independent insurance agents sell only via the internet.

Insurance Brokers – Brokers represent the customer rather than the insurance companies.

The difference between a broker and an independent agent is minimal.

As with independent agencies, these companies can be named after an individual person or by any number of other names. Insurance brokers have a fiduciary duty to their clients. When the client is ready to buy insurance from the broker, the broker must get a binder from an insurance agent or directly from the insurance company.

Direct Writing System – This insurance option does not involve an agent.

The people you work with are sales people for the insurance company, whose duty is to sell insurance only for the company they work for.

Some examples of this type of insurance channel are Geico and Progressive direct.

It’s worth noting that Progressive also sells insurance through independent insurance agents (and they actually have two different rate classes).

Direct Response – This system involves no agents or sales people. Customers are solicited via direct mail, phone, or the internet.

Both insurance agents and insurance brokers are licensed professionals in their states and must comply with all governing statutes and regulations.