What Does it Mean to be an Independent Agent?

What is an Independent Insurance Agent?

An independent insurance agent is a professional who is not restricted by having to sell only one insurance carrier’s products and services. The opposite of an independent agent is what is called a captive agent, who by contract can only market, sell and service a single insurer in a given geographic area.

Depending on the agency and how it is set up, independent agents can represent a number (or many) insurance companies and have the freedom to sell any of their products based on their clients’ needs.

In addition, independent agents can sell a wider variety of insurance products, such as Property, Casualty, Health, Life, and other coverages.

Do Independent Insurance Agents Need a License?

The answer to this question is yes. Every state has its own Department of Insurance and each requires that a person who is interested in selling insurance to the public be properly trained and licensed.

While every state’s insurance license requirements are different, the basic goal is the same; to ensure that anyone selling insurance not only obtains the basic knowledge of the profession, but also a solid understanding of the ethics laws that govern the industry.

Additionally, a license must be obtained for each line of insurance that an agent sells. For example, a person only licensed in Property and Casualty insurance cannot sell Life insurance without the proper credentials. For every type of insurance, a license must be issued to sell those products.

What Does an Independent Insurance Agent Do?

Whether an independent insurance agent has their own business or works for someone who does, the basic role is the same. The job entails representing various insurance carriers and selling their policies to clients who need them.

In addition to selling polices, agents also provide service to their clients by handling claims, answering questions, staying in touch and educating them about the type of insurance protection they need. The job of an independent insurance agent has evolved over the decades to be much more than just a sales position.

Clients today see their agents as trusted advisors who partner with them to ensure that their unique protection needs are met with the best insurance products available.

How Do Independent Insurance Agents Get Paid?

Independent insurance agents get paid for their services in a variety of ways. The most common revenue source for agents comes from commissions that are paid by an insurance carrier upon selling the company's policies.

Commissions are usually based on a percentage of the premium paid by a client for their insurance protection. Agents can also be compensated by charging a fee to their clients for services rendered. Instead of receiving commissions directly from an insurance carrier, some independent agents prefer the transparency of the fee-based arrangement. If an agent is employed by an insurance agency, the organization may compensate their employees in the form of an annual salary with the possibility of a bonus program.

Independent Insurance Agent Pros

There are many advantages to becoming an independent insurance agent. For one, because they have the ability to represent many different insurance companies, independent agents are not limited to a single insurance carrier's product offerings.

This helps agents meet the needs of a larger and more diverse group of clients. Independent agents can strongly advocate for their clients without being restricted by one company’s policies and procedures. They also have a much broader perspective on the industry since they have the ability to work with many insurance carriers.

Independent agents represent their clients, not an insurance company. Being in this position is very advantageous for policyholders, especially when a claim has occurred.

Independent Insurance Agent Cons

Because independent insurance agents operate their own businesses, there is no direct financial support from an insurance company like there is when someone is a captive agent, tied to one carrier. Additionally, independent agents must take the initiative to start their own organization or find employment with an established agency.

Agents who operate on an independent basis must also be responsible for getting licensed on their own, as well as arranging for any needed training. When it comes to the costs associated with starting an insurance office, an independent agent must pay for those expenses themselves. Captive agents normally receive various forms of support from the insurance company with whom they are associated.

How to Become an Independent Insurance Agent

The process of starting a career as an independent insurance agent is not difficult. First, a person needs to decide which types of insurance that they would like to sell. Whether that be Property and Casualty, Life, Health, or other kinds of policies, it is important to know which area of specialty will be the main focus.

Next, a person needs to get a license for the specific type of insurance that they will be selling. The requirements for obtaining a license will vary by state and area of insurance, so it is important to understand how to best prepare for the license exam in your specific area.

Lastly, prospective independent insurance professionals must make the decision whether they want to work for an insurance agency or open their own business.

Becoming Licensed

Individuals considering becoming licensed to provide insurance should look into one of our many insurance licensing courses.

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