Home Insurance The Difference Between Insurance Brokers and Captive Agents

The Difference Between Insurance Brokers and Captive Agents

Very few people take joy in the certainty of death. This also goes for the idea that an accidental death could occur at anytime. If there are individuals who rely on you and your earnings, nevertheless, it is one of those unpleasant things that you have to take into consideration.

It’s easy to see the sense in purchasing life insurance, even though it can be an unpleasant thing to think about. Even those without dependents still must think about funeral expenses if something tragic were to happen.

The question then arises: Do I need a life insurance agent or broker?

The first thing you need to understand is that there is a difference. Some life insurance agents only represent one company. Say for instance company A. This agent will only and can only work with one company. He is considered a “captive” agent.

An insurance broker is different. A broker is an agent who represents any number of insurance firms. He is not bound to any one individual company, he can go out and use any company that will allow him to.

Often, many clients who have interests in buying insurance policy will only work with one insurance agent directly. The problem is, if they are not aware that the agent is a “captive” agent, they might be getting less options than they had hoped for.

Seeing that an agent’s earnings are primarily on commissioned sales, he or she will most of the time want to seem as if he is providing one stop shop for all of the client’s insurance wants. However, does this necessarily mean you are getting the best deal possible?

The Benefits Of A “Captive” Life Insurance Agent

Now that you understand the difference, the question arises. Are there benefits then to a captive life insurance agent. The answer is yes, in some cases.

Captive agents usually work for companies that will only take on captive agents. Meaning that most insurance brokers can’t use the captive agency. Often times, companies like New York Life, Mass Mutual, and Guardian will deal mostly with captive agents, agents that only represent their company and no one else.

This is not always 100 percent true, however, it is often true.

When Are these Companies Good

Most of the time, these captive agencies are specialty companies. The three that I mentioned above deal is large quantities of whole life insurance, and other premium type of insurances. These types of insurance have many different purposes, and usually take a professional to structure properly.

In these situations, captive companies can be a great benefit to you as a consumer.

When Does An Insurance Broker Make Sense To Use?

There are other types of insurance, such as term insurance, that are more or less a commodity. This is where a life insurance broker will shine.

The independent agent is generally the perfect choice, as he/she will have many options to choose from, selecting from a database of insurance companies to find you the best deal.

In this situation, a broker will have the upper hand on a captive agent. Captive agents, who deal almost exclusively, won’t have the benefit of multiple companies to use. They are stuck with their companies product, which often times for these commodity types of products will be more expensive.

In these types of situations a broker is going to usually be the better decision.

Don’t Be Afraid To Shop Around

There are times when it is good to shop around, and other times when it isn’t.

If you are buying a specialty product-like properly structured whole life insurance as an investment, key man insurance policies, or asset management type products-then you should probably go with brains over brawn.

Having an agent that knows what he is doing is going to save you more money in the long run. Saving a few extra dollars to later find out there is mistake can be extremely costly. You could end up losing years of premium payments, or even leaving your heirs with a significant tax bill.

In specialty situations, use someone who knows what they are doing and it will be worth the cost.

Shopping around in these situations may not be the best idea.

However, with other commodity type insurances-term insurance being the primary type-don’t be afraid to talk to more than one agent. This could not only save you money, but the hassles of dealing with a pushy agent.

Find the best agent that fits you well. Don’t be afraid to say “no” to someone and move on if you feel they are being pushy or they don’t know what they are talking about.

The more you understand about what you are buying the better your chances of getting what you need, and not what you are sold.


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