Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Apr 14, 2022

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In a nutshell...

  • There are different types of agents, including captive agents, independent agents, and insurance brokers
  • While captive and independent agents tend to work for the insurance provider, the insurance broker tends to work for the customer and specializes in insurance for unique needs
  • Each agent makes money through different revenue streams, including a base salary, commissions, referrals, and renewals

Insurance agents commonly make money through different revenue flows, including a base salary, commission from policies sold and residual revenue from policy renewals or customers referrals.

Although many agents make money through these different revenue streams, it should not be surprising that there may be a tremendous difference in the amount one agent makes compared to another.

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Captive Agents, Independent Agents, and Insurance Brokers


To understand where an agent’s revenue comes from, understanding which type of agent you have is important.

There are three main types of insurance agents: captive agents, independent agents, and insurance brokers.

Captive agents are sometimes referred to as direct agents since they write policies for only one company. Independent agents, on the other hand, write policies for several different insurance companies.

Insurance brokers are most often used in regards to more complicated insurance purchases, such as insurance purchases for a small business.

While captive agents and independent agents represent the insurance company, insurance brokers represent you or your company.

Due to the nature of their work, insurance brokers are not always considered an insurance agent in the same way that a captive or independent agent is.

Just like choosing an insurance company, choosing an agent requires some comparison shopping.

Every agent will be able to offer different services and levels of confidence based on the type of agent, the companies they work with and their years of experience.

You may also be able to learn more by contacting your state’s Department of Insurance, which may publish records regarding written complaints about your potential choice.

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Making Money Through a Base Salary

Captive agents and independent agents both normally receive a base salary, which is a fixed, annual amount.

Captive agents work for one insurance company, and due to this, they may earn more as a base salary by operating as a direct seller.

Independent agents, on the other hand, may not receive as much from the insurance companies they represent.

Some estimates state that captive agents may make up to 50 percent more than an independent agent, as long as their qualifications are similar.

Making Money From Policies Sold

Captive agents and independent agents both tend to make money in the form of commissions from policies sold.

While captive agents rely on their base salary, independent agents often rely on earning higher commissions to compensate for their lack of a base salary.

Independent agents may also make more money on each policy transaction, based on how well they retain customers and how productive they are.

Conversely, captive agents may only receive a small commission based on each policy they write.

Making Money From Policy Renewals

In addition to making a commission when a policy is initially sold, captive agents and independent agents may make money when the policy is renewed.

Both captive and independent agents tend to make a commission when the policy is first written.

This amount is a percentage of the total policy value, and the percentage paid out varies based on the insurance company the policy is with.

When it comes time to renew an insurance policy, the annual premium may go up.

When this amount changes, the residual revenue the agent receives may also increase, which varies based on the rules of the insurance provider the agent is selling for.

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Making Money From Customer Referrals

According to a recent survey, over 75 percent of consumers ask their friends and family for advice relating to insurance, whereas 65 percent said they were likely to talk to colleagues or social acquaintances for advice.

Word of mouth can be one of the most powerful tools that an agent has when it comes to driving business and retaining their current customer base.

By driving new customers to the business, captive and independent agents can increase the number of policies written, as well as their commissions.

While a captive agent can only offer policy pricing from the company they work directly for, independent agents can offer a variety of pricing and policy options.

As you shop around for the perfect agent, the perfect insurance company or policy, make sure to work with a company that is proactive and suits your specific needs.

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