Should you buy insurance from a captive agent? Before doing so, it’s important to understand how they work, potential advantages or disadvantages, and the differences between a captive agent and other types of insurance salespeople.
What Is a Captive Agent?
A captive agent agrees to sell policies from only one insurance company, and potentially its partners. However, it’s unlikely that you’ll hear the term “captive agent” when looking over an agent’s website. In everyday language, they may be agency owners or be referred to as “local agents.” Captive agents are usually independent contractors, although some may be employees with medical and dental benefits. A captive agent typically earns a commission for every new or renewal policy they sell, and some may also earn bonuses.
Alternate names: Local agent, exclusive agent
How Does a Captive Agent Work?
A captive agent can offer quotes on coverage from their carrier, but they can’t get you a quote from another insurance company. However, they typically have in-depth knowledge of what their insurance coverage can—and cannot—provide, so they can make sure the policy is a good fit for your needs. Often, these agents have a brick-and-mortar business that customers can visit or call to buy insurance. Customers might be pointed toward these captive agents through the insurer’s website, or find it on their own through advertising or by driving past the office.
What’s the Difference Between Captive, Direct, and Independent Insurance Agents?
In general, there are three types of insurance agents: independent insurance agents, captive agents, and agents who work directly for a particular insurance company. Here’s a look at the differences between them.
Pros and Cons of Captive Agents
Pros Explained
Represent name-brand recognized companies: Major insurers like GEICO, State Farm, and Allstate use captive agents, so you’ll be insured by an established company. Of course, you should also research online reviews before choosing an insurance company. Local knowledge and support: A captive agent is often part of your community, so they are likely familiar with your area and any local needs or potential hazards. Connecting with a captive agent near you is also a good choice if you wish to support a local business and establish a relationship you can rely on as your insurance needs evolve. Personalized service: A captive agent should ask you questions to discover your potential risks, discounts, and coverage needs to make sure they tailor your policy to fit your situation. However, remember that they can only offer policies from a single insurer.
Cons Explained
Limited coverage options: Captive agents only represent a single carrier and can’t give you quotes for coverage from other insurance companies, so you’ll have to shop around on your own. Customers are tied to the insurer, not the agent: Your captive or local agent may leave the insurance company to start their own independent business or go to a competing insurance company. In this case, you’ll likely remain a customer of the original insurance company unless you change insurers because your captive agent doesn’t own their “book” of customers. In contrast, an independent agent works with you no matter which insurer you end up selecting from their represented carriers. May not be able to provide specialized coverage: A captive agent may not offer specialized coverage if you have a unique situation—for example, a DUI on your record. If you require a type of insurance (such as health or business) that’s not provided by their insurer, the captive agent can’t offer it.
Have access to enough funds to start a business.Become licensed to work as an insurance agent.Take training with the insurance carrier. Pass a financial and background check screening.
