Independent Insurance Agents: What They Do and Who Needs One

An independent insurance agent is a salesperson who represents multiple carriers. Find out if one is right for you.

Robin Hartill, CFP®
Writer | Personal finance, life insurance, budgeting

Robin Hartill, CFP®, is a freelance writer who covers life, pet and homeowners insurance for NerdWallet. She holds a bachelor's degree in English from the University of Florida. With more than 15 years of writing and editing experience, Robin enjoys breaking down complex financial topics for readers to help them make smart decisions about money. She is based in St. Petersburg, Florida.

Lisa Green leads the life insurance team and oversees insurance-focused data journalism at NerdWallet. A professional journalist since high school, she was an insurance writer at NerdWallet before becoming an assigning editor. Previously, Lisa spent more than 20 years as an editor at The Tennessean in Nashville, where she led business and consumer coverage for several years. At The Tennessean, she was part of a 2011 Pulitzer Prize finalist team for coverage of devastating floods in Middle Tennessee. Her work has also won awards from the Society for Advancing Business Editing and Writing, Investigative Reporters and Editors, and the Society of Professional Journalists. Lisa is an alumna of the Wharton Seminars for Business Journalists at the University of Pennsylvania. She has also studied data journalism with the National Institute for Computer-Assisted Reporting, business editing with the American Press Institute and writing, editing and news research with the Poynter Institute. In addition to her work at NerdWallet, Lisa is a real estate investor and has taught a seminar on how to earn college scholarships. She is based in Nashville.

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• Independent insurance agents don’t work for a single company and can sell coverage from multiple carriers.
• An independent agent often works with smaller insurance companies.
• Working with an independent agent can be helpful if you have complex insurance needs or can't find coverage.

Finding a suitable insurance policy can take time. One option to make the process easier is to work with an independent insurance agent. Independent insurance agents are third-party salespeople who have a relationship with multiple companies and get paid a commission when they sell you a policy. Because they aren’t bound to a single insurance company, they can help you compare options across several carriers to find the right policy for you.

But working with independent insurance agents can have downsides, too. Read on to learn whether you should shop through independent insurance agencies.

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Independent insurance agents, explained

Insurance agents represent one or more insurance companies and earn a commission when they sell a policy on behalf of an insurer they represent. Agents can also help customers assess their insurance needs and provide assistance if they need to file a claim.

There are two types of agents: captive agents and independent insurance agents.

Captive agents work for a single company, either as employees or as independent contractors. They may show you price quotes from multiple companies for comparison, but captive agents can only sell you a policy from the company they represent.

Independent insurance agents represent multiple insurers and can sell you a policy from any of the companies they work with. They must be licensed and have a contract with each of these companies spelling out how the agent can act on behalf of the insurer, as well as the commission the agent will be paid. [0]

Major carriers often use captive agents to sell their products. Independent agents generally work with a range of companies, including smaller ones you may not have heard of. Because they’re familiar with smaller insurers that may specialize in certain niches, independent insurance agents may be able to help if you’re having trouble finding affordable coverage or your insurance needs are complex.

How an independent insurance agency can help you

Not everyone needs to work with an independent insurance agent. For example, if you’re shopping for auto insurance on a single vehicle and you have good credit and a clean driving history, you can probably shop for quotes online without enlisting a pro. But there are some situations when independent insurance agents can be particularly helpful.

Auto insurance : If you’ve had multiple crashes or a serious driving violation, like a DUI or reckless driving charge, your insurance company may classify you in its nonstandard category. That means it considers you a high-risk driver. [0]

Independent auto agents can often help you find affordable coverage because they frequently work with smaller companies that are more likely to issue nonstandard policies.

Homeowners insurance : Working with an independent insurance agent can be helpful if your homeowners insurance costs have shot up or you’ve received a nonrenewal notice. Local independent insurance agents will often be familiar with insurers who write policies in your area and can shop for quotes on your behalf.

Life insurance : If you have a pre-existing medical condition, a risky occupation or hobbies an insurer considers dangerous, you could benefit from working with a life insurance independent agent who specializes in impaired risk underwriting. Your agent may be familiar with the carriers who will insure clients with specific risks. The agent may also be able to request information about your situation from the insurer before you formally submit an application.

While a good independent insurance agent can help you find affordable coverage, understand your policy and file a claim, it’s also important to understand what your agent can’t do. For example, many insurance agents want clients to know that they can’t get retroactive coverage for something that has already happened. Also, you shouldn’t wait until after your policy has been canceled to contact an independent insurance agent, as companies view a customer who lets coverage lapse as riskier and may charge higher rates.

How independent insurance agents get paid

Independent insurance agents are paid a commission. The commission structure varies based on the type of insurance and carrier.

Typical life insurance commissions range from 60% to 80% of the first-year premiums, with a smaller amount going toward commissions in subsequent years. Some agents don’t earn commissions after the third year of the policy.

For auto and home insurance, typical commission rates are 5% to 15% of first-year premiums. Agents typically earn 2% to 5% on premiums for renewal in the following years.

Keep in mind that independent insurance agents get paid a higher commission for selling you a pricier policy. If you’re looking at buying a particularly expensive policy, such as permanent life insurance , consider hiring a fee-only financial planner or insurance consultant to be sure it’s appropriate for you. They won’t earn a commission and can help you objectively assess your needs.

Pros and cons of working with independent insurance agents

Be sure to consider these pros and cons before you choose how you are going to shop for and purchase insurance.