In part one of this blog series, I told you where NOT to shop, if you want to buy competitive term life insurance. In part two, I told you how buying life insurance is different than buying home or auto insurance, how using experienced independent life insurance agents is your best option, for buying the right term life insurance policy for you at a great price, and how to tell a competent agent from a less competent one. You now have some idea on how to tell a good independent life insurance agent from a bad agent, but how do you know if you are really working with an independent insurance agent? This blog post will tell you the difference between independent insurance agents and other agents, why independent insurance agents, when it comes to life insurance, often have the best options for you, and how to know if your agent is a captive or an independent insurance agent.

Here’s some information explaining the limitations and advantages of different types of insurance agents:

What is an independent insurance agent, and how do they differ from other insurance agents?

There are salaried agents who are employees of the company they represent, like Liberty Mutual. But this isn’t too common. Most insurance agents, or at least the ones with the highest public profiles, are captive agents, meaning they are independent contractors representing a single company, like State Farm, Allstate, American Family, Metlife, Prudential, New York Life, Northwestern Mutual, and many more. The captive agent is self-employed, but he or she is restricted and controlled by the company they represent in how the do business, similar to a franchise owner.

For example, as an Allstate agent, you can work when you like, but Allstate dictates which days and what hours your office must be open. If Allstate wants your agency open during normal business hours on the Friday after Thanksgiving, you need to comply, or there are consequences. If a captive insurance company wants to get rid of you as their agent, it has to comply with the contract the company signed with you. But there are many stories of successful captive agents, running afoul of the company, being terminated, and having their business taken away from them. Still, there are many captive agents very happy being captive agents.

A drawback for the customer or insurance shopper, using a captive agent, is the captive agent can use only the one company, or give that company first right of refusal. For example, if you have 2 DUIs, you don’t qualify for American Family auto insurance, so the American Family agent may be able to quote you Progressive auto insurance.

With life insurance, captive agents may be able to offer life insurance products from a few different insurance companies, if the captive company has an arrangement with the other companies. But these products are likely to be permanent insurance, annuities, and investments, and you will be offered only the captive company’s term life insurance. Even when the captive company allows their captive agents more freedom, it rarely turns into more options for the customer.

For example, Northwestern Mutual agents may broker for other companies, but there is very strong pressure (financial & managerial) on them to sell certain products from Northwestern Mutual. If you can afford it, you are likely to be told the best product for you will be a Northwestern Mutual Whole Life Insurance policy. Many life insurance agents start at captive companies, hate the pressure to push certain life insurance products, rather than doing what’s best for their customer, so they leave and go independent.

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For example, if you buy a Prudential term life insurance policy from an independent agent, and five years later, the agent reviews your situation, and sees Ohio National can now offer you a better policy for a longer period, with more coverage, at a better price, the independent agent can replace (with your permission & application submission) the Prudential policy with the Ohio National policy. If you bought the Prudential term life insurance policy from a captive Prudential agent, it’s not likely the captive agent could ever offer you a better policy from another insurance company. Unlike many auto & homeowners insurance, most life insurance companies having captive agents also sell through independent agents. However, not all independent insurance agents are appointed to sell for all the companies selling through independent insurance agents, and some companies, like Northwestern Mutual, and companies selling direct, like USAA & Ameritas, don’t sell through independent agents at all.

Think of the difference between independent agents & captive agents like this: The captive agent owns a Burger King, and the independent agent owns his own burger joint. If you want a burger, the captive agent can only offer you something off the Burger King menu, like a Whopper. The independent agent can sell you any type of burger you want, as long as he has the ingredients. In fact, if you tell the independent agent what you want to eat, and the agent doesn’t have it, he can usually find it for you, and add it to the menu. Just don’t expect to be able to get a McRib.

How can you tell an independent insurance agent from a captive insurance agent?

A captive agent’s business will advertise the captive company’s name, as well as the name of the agency. For example, “State Farm” & “Ruth Jones Agency”, would appear on the store front’s signage, phone book ad, business card, etc., where insurance businesses advertised soley as “Miller Agency”, or “Strong Insurance” (assuming there is no Strong Insurance Company), are likely independent insurance agents. Captive companies don’t always want to make telling the difference between a captive or independent insurance agency easy for you. Allstate sometimes calls its captive agents Allstate independent agents. But in some rural areas where Allstate does not have a lot of captive agents, they will contract with independent agents. But there is a big difference between an Allstate independent insurance agent, and an independent insurance agent selling Allstate products. Other major companies, like Nationwide, also blur the lines between captive and independent. If you have any doubt, ask the agent to whom you are speaking if he or she is an independent or captive agent. If you are wary of the agent’s response, ask a competing agent from another agency to confirm what you were told.

Independent insurance agents can sell many types of insurance, and many independent insurance agents specialize, not only in certain lines of insurance, such as health insurance or business insurance, but can work in a specific niche, such as life insurance planning for business owners, or burial life insurance for seniors, needing a policy to cover final expenses. However, if you are a senior in good health, you may be able to get a lot more life insurance coverage at a better price from another independent life insurance agent, rather than an independent life insurance agent selling only burial insurance. If you are reading this blog series, you want to find independent life insurance agents specializing in term life insurance. Part four of this blog series will give you tips about how to find the right independent life insurance agent for you, and avoid the ones trying to sell you the wrong type of term or other type of life insurance.

No matter what your budget is, an affordable term life insurance plan can be designed for you.

Have you ever worked with an independent life insurance agent? What was your experience? Comment on my facebook page. If you have questions and would like my help, you can reach me at help@smartshopyourcarinsurance.com. Follow me on Twitter for important insurance consumer news & new blog entries at CarInsWatch.