Life Insurance Broker VS Agent

Author:Shelden SmollanChief Experience Officer
Shawn Redford
Reviewed by:Shawn RedfordChief Business Development Officer
April 4, 2023
8 Minute Read

Understand the differences between a life insurance broker and an agent and how they can affect your insurance coverage and costs. 

A life insurance agent and a broker collaborating

Difference Between Insurance Broker and Agent

Both insurance agents and brokers act as middlemen between insurance buyers and the companies that offer it. However, insurance brokers typically represent multiple insurance companies to find the best coverage and compare policies for their clients. While agents represent just one insurance company and sell only that company’s policies

When you’re looking for insurance coverage for yourself and your family, it’s important to find a professional in the insurance industry who has your best interests in mind and can give you the best options on the market at the best prices and with the best coverage. To make a good choice, you should know the difference between insurance agents and brokers.

What Do Insurance Agents Do?

In the United States, an insurance agent is a state resident licensed professional who represents an insurance provider and helps individuals and businesses obtain a plan for insurance. Agents are an important part of the insurance and financial services industries because they act as a link between clients and insurance companies. They teach clients about different insurance policies and plans, such as their benefits, costs, and limits, and help them choose the right coverage for their needs. Insurance agents also process insurance applications, sometimes collect the first month’s premiums, and assist clients file claims when necessary.

In addition to life insurance, there are also specialized insurance products that agents can offer, such as disability insurance, long-term care insurance, professional liability insurance, and critical illness insurance. Overall, both insurance brokers and agents play a crucial role in helping individuals and businesses protect their assets and manage risk.

A Day In The Life Of An Insurance Agent

An insurance agent meeting with an insurance broker

Types of Insurance Agents in the USA. Key Differences.

Captive agents and independent agents are two kinds of agents.

  • Captive insurance agents only sell goods from one company.
  • Independent agents, on the other hand, can work with as few as one insurance company or as many as several dozen.

Read on to find out more about these different kinds of agents.

Captive Agents: Exclusive Insurance Experts

Learn how captive life insurance agents provide specialized services, exclusive policies, and personalized support to their clients.

A captive insurance agent is a trained insurance worker who only works for one company. They are called “captive” because they are only allowed to sell insurance for one company. This means that they can’t give quotes or plans from other insurance companies. This doesn’t mean, though, that they can’t give you excellent choices.

In fact, working with a captive agent can be beneficial in many ways. Since they work exclusively with one insurance company, they have an in-depth understanding of the products and services offered by that company. They can provide you with expert advice and guidance on the best policies that meet your specific needs. They can also help you navigate the complex world of insurance by explaining the terms and conditions of your policy in simple language.

Moreover, these insurance agents are often able to offer exclusive policies and discounts that are not available to the general public. They can also provide personalized support and assistance throughout the policy term, including handling claims, renewals, and other related services.

However, it’s important to note that working with a captive agent may limit your options when it comes to choosing an insurance policy. Since captive agents typically represent only one company, you may not be able to compare quotes or policies from other insurers. This means that you may miss out on potential savings or better coverage..

In summary, while working with a captive agent has its advantages, it’s essential to weigh the pros and cons before making a decision. Consider your specific requirements and preferences when choosing an insurance professional. If you value personalized support, exclusive policies, specialized coverage, and expert advice, then a captive agent may be the right choice for you. However, if you prefer more flexibility and options when it comes to choosing an insurance policy, then an independent agent or broker may be a better fit.

Agents meeting in a boardroom while one agent gives a presentation

Independent Insurance Agents: Your Personalized Insurance Experts

Explore how independent agents provide customized insurance solutions and exceptional customer service.

An Independent Insurance Agent is an insurance professional who is not affiliated with any particular insurance company, but rather represents multiple insurance companies. These agents are referred to as “independent” because they have the freedom to provide insurance quotes from multiple providers, allowing them to compare coverage options and find the right insurance for their clients’ needs. This type of individual usually has extensive understanding of the insurance industry, which allows them to give their clients quality advice, direction, the biggest range of products, and the best price.

Such agents specialize in finding the right insurance plans for their clients, particularly for individuals, independent contractors, or businesses with complex insurance needs. This can also include coverage for business insurance, such as liability, property, complex risk coverage, and worker’s compensation insurance. 

Additionally, these agents provide ongoing support to their clients, including assistance with claims and policy updates. By working with an independent insurance agent, clients benefit from the expertise of a professional who has their best interests in mind and can provide unbiased advice regarding their insurance options.

Independent Agent Careers

Captive vs. Independent Life Insurance Agents

One key difference between the two is that captive agents may have more knowledge and expertise about their parent company’s products, while independent agents can offer a broader range of options and unbiased advice. Ultimately, the choice between a captive agent and an independent agent depends on the buyer’s individual needs and preferences.

Here’s a table comparing Captive and Independent Agents:

Captive AgentsIndependent Agents
Represent specific insurance companiesWork with multiple insurance companies
Sell policies directly to consumers on behalf of the company they representOffer policies from various insurers
Limited to the products and services of the company they representHave access to a wide range of insurance options
Can provide specialized knowledge about the products of the insurance company they representOffer more choices and flexibility
Receive sales commission from the company they representReceive commission from insurers and brokerage fees from consumers

Independent Life Insurance Brokers: Unlocking a World of Coverage Options

Learn how independent brokers offer a wide range of insurance choices from multiple carriers.

An insurance broker is a state resident licensed professional who works as a go-between for insurance buyers and insurance companies. Insurance brokers represent the interests of their clients, not the interests of insurance companies. Unlike captive agents, who may represent only one company, brokers typically work with multiple insurers and are able to offer their clients a wide range of insurance options from different providers.

Insurance brokers work for brokerage firms, which are companies that specialize in insurance brokerage services. Brokers help clients assess their insurance requirements, compare insurance plans and insurance choices, and submit insurance contracts on their behalf. They may also provide ongoing support and advice to their clients, including assistance with claims and policy renewals.

A smiling insurance broker

Types of Insurance Brokers

Retail Brokers vs. Wholesale Brokers vs. Surplus Lines Brokers

Retail Brokers

A retail broker is a type of insurance broker who specializes in providing insurance products to an insurance buyer, like an individual customer or small businesses. They may work for an insurance brokerage firm or operate as an independent insurance agent. Like other types of brokers, they work as an intermediary between insurance buyers and insurance carriers.

They help clients assess their insurance needs, compare insurance policies and coverage options, and negotiate insurance contracts on their behalf. This type of insurance broker typically earns a commission from insurance companies for the policies they sell, and may also charge broker fees for their services. The main difference between a retail broker and other types of insurance brokers is their focus on serving individual customers and small businesses, rather than large corporations or specialized industries.

Wholesale Brokers

Wholesale brokers are intermediaries who specialize in providing insurance products to other insurance professionals, such as managing general agents, and underwriters. Wholesale brokers have access to a wide range of insurance markets and specialty products that may not be available to retail insurance professionals. They help their clients navigate the complexities of the insurance market and find the best solutions for their customers.

Wholesale agents get a payment from insurance companies for every policy they sell, and they may also charge broker fees for their services. These fees can be different based on the type of insurance policy, the amount of coverage, and how complicated the deal is.

Surplus Line Brokers

Surplus Lines Brokers are insurance experts who help people find coverage in the non-admitted market for surplus lines insurance. These brokers are allowed to get insurance from companies that aren’t licensed in the state where they do business but are licensed in another state. They act as intermediaries between insurance dealers and traders and excess and surplus lines (E&S) insurance companies. They don’t deal directly with people who want to buy insurance.

Surplus lines brokers are qualified agents who work with E&S insurers to get you coverage. Some businesses are not attractive to normal insurers because they have a history of making a lot of claims or because they do things that are dangerous. These businesses may need the help of a surplus line broker to get the insurance coverage they need. E&S insurers focus on risks that standard insurers won’t cover, and SL brokers can help you find coverage in the E&S market if your agent can’t get you company coverage from a standard insurer.

What is the Difference Between Insurance Agent and Broker?

When you buy insurance, you’ll probably have to choose between agents and brokers. Both brokers and agents can help you find suitable insurance choices, but there are some key differences between them.

In the USA, the main differences between agents and brokers are their roles and relationships with clients and insurance companies. 

Captive Insurance agents represent one insurance company and sell policies of that company to clients. They are authorized to bind coverage and may have specific authority to make underwriting decisions on behalf of the insurance company.

The insurance broker or independent insurance agent represents the interest of the insurance client rather than insurance agencies. Insurance brokers work directly with multiple insurance providers to find the best policies and coverage choices for their clients.

Life Insurance Broker VS Agent

Benefit of Working With a Broker

Brokers do not work for life insurance companies, so when it comes to insurance and your policy, they will always put your needs ahead of the needs of the insurance company when helping you decide which one is best for you. The buyer is represented by the insurance broker.

Here is a table that shows how agents and brokers are different:

Captive Insurance AgentInsurance Broker or independent agent
Sells policies directly to consumers on behalf of specific insurance companiesActs as liaison between consumers and insurers, agents, or underwriters
Receives sales commission from insurers (and sometimes contingent commissions)Receives commission from insurers and brokerage fees from consumers
Works with specific companiesBroad access to full insurance marketplace
Enter key on a keyboard wit ha bag of money symbol

How do Insurance Brokers and Agents Make Money?

How do Insurance Brokers Make Money?

Brokers earn a commission from the insurance company for the policies they sell, and their clients may also pay fees for their services. These additional fees can vary depending on the type of insurance plan, insurance solution, the amount of coverage, and the complexity of the transaction.

How do Captive Insurance Agents Make Money?

A captive Insurance agent earns commissions from the insurance companies whose policies they sell. The commission rate may vary depending on the type of insurance plans, the insurer, and the agent’s level of experience and performance. The commission is usually a percentage of the premium paid by the insurance buyer, and is paid to the agent by the insurance company. Some agents may also receive bonuses or other incentives for meeting sales targets or other performance goals.

In addition to commissions, some agents may charge fees for their services, such as policy review or risk assessment.

How do Independent Insurance Agents Make Money?

Independent agents make money by representing and selling insurance products to individuals and businesses. They are licensed professionals who offer a variety of insurance products, such as health insurance, term life insurance, disability insurance, and other types of financial protection.

How do I become a successful life insurance broker? 

To become an insurance representative or broker, you have to meet license standards. These differ from state to state, but you will have to pass tests, meet rules for ongoing education, and provide personal information.

Step-by-Step Guide to Becoming a Licensed Life Insurance Agent

Are you considering becoming a life insurance agent? Becoming an agent can be a great way to start your career in the financial industry, giving you the opportunity to work with individuals and families to secure their futures.

Elevate Your Career With Experior

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Why Choose Experior Financial Group, Inc.

An Experior Financial Group Inc. agent has access to many different carriers, and will review your current financial position. We provide a comprehensive expert financial assessment to help you determine the best products for your needs and wants.

FAQ – Frequently Asked Questions About Insurance

Are you better off using an Insurance Agent or Broker?

Whether you are better off using an insurance agent or broker depends on your individual needs and preferences. Agents may be a good option if you want to work with a specific insurance company. Brokers may be a better choice if you want access to a wide range of insurance products and providers, or if you prefer working with an independent intermediary who represents your interests. Ultimately, it’s important to do your research and choose a reputable and knowledgeable insurance professional who can help you make informed decisions about your insurance coverage.

What are the disadvantages of using an Insurance Broker?

One potential disadvantage is that an insurance broker may not be familiar with every detail of the policy and company you are considering. Their training may be more general in most circumstances, but if they ask you questions to help them discover your coverage needs, they should know enough to help you make the right decisions.

Are Insurance Brokers worth it?

An insurance broker can be worth it, especially if you are purchasing insurance for the first time or have complex insurance needs. A traditional life insurance broker can offer expert advice, provide access to multiple insurance providers, and help you navigate the insurance market to find the best policies and coverage for your unique situation.

What is a life insurance broker?

A life insurance broker is a professional who helps clients find and purchase a life insurance that best suits their needs. They work with multiple insurance companies, enabling them to offer a wide range of options.

Insurance broker vs insurance company: What’s the difference?

An insurance company is an entity that provides insurance plans. An insurance broker, on the other hand, does not provide insurance directly but assists clients in purchasing policies from insurance companies. 

Insurance broker vs insurance agent: What distinguishes them?

An insurance agent typically works for one specific insurance company and sells only that company’s products. In contrast, an insurance broker represents the buyer and has the ability to shop around with multiple insurance companies to find the best policy for their client. 

Life insurance broker vs agent: How do they differ?

Much like the general distinction between brokers and agents, a life insurance agent sells policies on behalf of a single insurance company, while a life insurance broker works independently to help clients choose the best life insurance from various companies. 

How do I become a successful life insurance broker?

To become a successful life insurance broker in insurance sales, you need to gain in-depth knowledge about various life insurance products and the insurance industry as a whole. Excellent communication skills, strong customer service, persistence, and a knack for insurance sales are also crucial. Obtaining the necessary licenses and certifications will also be required. 

What does a life insurance broker do? 

Life insurance brokers represent and help clients understand different life insurance policies and guide them in choosing the most suitable one based on their needs and financial status. They negotiate with insurance companies on behalf of the client to get the best possible rates. 

What are the disadvantages of insurance brokers?

While brokers can provide a wide variety of options and personalized service, they may charge fees for their services. Additionally, some brokers may not work with all insurance companies, so clients may not have access to every policy available in the market. Lastly, the quality of service can vary significantly from broker to broker. 

Shelden Smollan
Shelden Smollan, Experior Financial Group's Chief Experience Officer, has spent more than 45 years working in the fields of Life Insurance and finance. He is an excellent insurance sales and management executive with exceptional strategic thinking, marketing, and leadership abilities. He has been Experior Financial Group Inc.'s Chief Experience Officer for the past six years, and his vision and expertise have been instrumental in the company's growth and development. By arranging meetings between agents and carriers so that our team of associates can learn from them and draw inspiration from them, he has assisted our IMO in expanding.