an insurance agent deciding which type of insurance agent they should start

When it comes time to open your own insurance agency, you will have multiple decisions to make, including whether you should open a captive or an independent one. Either type of agency will let you serve clients by offering insurance and a high level of customer service. But they have some very important distinctions.

Take a closer look at the pros and cons of each captive and independent insurance agencies to discover which of the two is better for your needs and plans.

Understand the Main Difference

Before we get into the pros and cons of independent and captive insurance agencies, make sure you understand the difference between the two.

The biggest difference is that with a captive agency, you technically work for a particular insurance company. This means that you are restricted to only selling products from that carrier, but you also receive the benefits associated with working with them.

By contrast, starting an independent agency gives you the freedom to work with as many carriers as you want, but you receive fewer starting materials and benefits.

Pros of Captive Agencies

One of the biggest pros of opening a captive insurance agency is the amount of support that you receive.

To start, you will typically get training directly from the carrier you work for. This removes the hassle of needing to familiarize yourself with their products and services yourself.

You will also frequently be able to take advantage of the carrier’s marketing materials, or at least benefit from their major campaigns. On a related note, you get the benefits of being associated with a major insurance carrier. Since that name is instantly recognized, especially after and during major ad campaigns, it lends legitimacy to your agency.

It is also very likely that your chosen insurance carrier will pass leads onto you.

It tends to be more affordable to start a captive agency than an independent one. You will have lower initial investment requirements and lower start-up costs. This also means there is a lower risk.

On top of that, you tend to have a more reliable, consistent income.

Cons of Captive Agencies

The biggest disadvantage of owning a captive insurance agency is that you limit yourself to only selling products from that single carrier.

This reduces your opportunities for cross-selling and up-selling, as well as your ability to meet the specific needs of each of your clients.

You also tend to have a much lower cap on your potential profits as a captive agent than an independent one.

Additionally, the insurance company technically owns your book of business. That is also part of the reason for your cap on commissions and income.

Pros of Independent Agencies

The main advantage of being an independent insurance agency is that you are in complete control. You can sell whatever insurance services you want and use multiple carriers.

This is excellent for you as well as your clients. To start, it lets you compare quotes across carriers for clients, ensuring that you find the best insurance products for their needs and budget. Instead of selling for a particular carrier, you truly look at what is best for them. Clients prefer this, which will help you attract new clients and maintain a positive reputation.

The fact that you are free to sell insurance from multiple carriers also leads to other benefits. First, your products are flexible. If you don’t currently offer a particular type of insurance and a client asks for it, you can source it for them. This typically isn’t an option with a captive agency unless your chosen carrier offers it.

Additionally, if the prices change dramatically or the policies of the carrier change, you can find your client a different carrier instead.

You also get the advantage of diversified income. Instead of relying solely on a single insurance carrier, you can use as many as you want. This is particularly helpful in case one carrier experiences a sudden drop in reputation, offerings, or something else. If you were a captive agent, you would have to deal with the loss. Independent agents, however, can simply put more effort into their other carriers, and they have the peace of mind that other carriers make up for the drop.

There is also the fact that you own your book of business. This is a saleable asset that can increase in value.

All of those factors also mean that your earning potential is higher as an independent insurance agent.

Cons of Independent Agencies

If you choose to open an independent agency, you won’t get any of the benefits associated with a particular carrier.

This means you have to pay for your own training and benefits. You must pay for your own marketing. You have to hire any tech support and administrative assistance you need.

You will also have higher upfront costs and need to work harder to get name recognition.


Some people will be happier starting a captive insurance agency, while others will prefer to start an independent insurance agency. A captive agency may be ideal for newcomers, while independent agencies are better for more experienced agents. Captive agencies limit you to selling insurance from a single carrier but reduce your initial costs and give you extra resources. Owning an independent agency has higher initial costs but gives you the freedom to sell from any carrier and puts you in complete control, helping you attract customers and generate larger profits.