Understanding the Differences: Insurance Agent vs. Independent Broker


Whether you’re considering a new career in health insurance sales, or you’ve been selling for a while, it’s important to understand the differences between an “insurance agent” and an “independent insurance broker.”

Both options offer many benefits, and each can be financially rewarding, too. However, there are differences in the ways each works. In addition, depending on where you plan to do business, there could be differences in your licensing options as an insurance sales professional.

License Types

In California, the Department of Insurance offers more than 30 license types. Among the most popular licenses are the following:

You can be licensed individually or as business entity – either as a resident or non-resident.

In Nevada, more than 15 license types are available through the Nevada Division of Insurance. However, a “Producer” license is the choice for most insurance sales professionals. Both Individual and Business Entity licenses are offered.

Agent or Broker?

After completing your state-mandated training and earning your selected license, that’s when you determine how you want to work – and for whom. You can choose to work as an agent for an insurance agency, a bank, or a financial services or health insurance company. In this role, you may earn a base salary, or you could earn a commission on each product sold. You may also be eligible to earn a bonus based on sales during a specified sales period or on your cumulative sales throughout the year.

A licensed agent can be “captive” meaning he/she/they represent a single insurer and are prohibited from selling products distributed by other companies. Among the most well-known captive organizations are Allstate and State Farm; agents who work for these companies are, generally, not permitted to sell products or services from other insurers.

Or, you can choose to work for yourself as an independent broker, representing multiple insurers. In a broker role, you most likely will earn a commission on each sale. You may also be eligible for a bonus based on sales during a specific time period or cumulative sales throughout the year.

Because an agent can bind an insurance contract with a company on behalf of a client, it’s often suggested that agents typically represent the interests of the insurer, while brokers represent the interests of their customers. While this may be true, insurance sales professionals need to be guided by state ethics rules.

Captive pluses and minuses: When you’re working in a captive agency or as a captive agent, you only need to learn about the products and guidelines of one company. Your employer may even offer paid training or other assistance as you set up shop. You may receive leads from your employer if you represent a recognized regional or national brand. On the negative side, you may have just one product or a short roster of products to sell. They may be priced well, or they may not. If the company you represent stops selling a product that’s popular without replacing it, your clients may complain or may be motivated to take their business elsewhere.

Independent Broker Advantages

When you’re an independent broker, you’re able to be your own boss, work from your home or office (or virtually anywhere), and offer health insurance from a variety of health insurance companies. That enables you to work with your clients, get to know them, and find the product that is the best match for their business (and employees) or for their individual or family health care needs and budget.

Working as an independent broker, you may be able to make your own hours and market yourself (and your business) in the way you want. You can sell as many – or as few – products as you choose. You may want to specialize in a certain market niche (for example, employee benefits for businesses with five to 20 employees). In this role, you’ll be working to find the best health insurance plan (or a multi-plan exchange) to address the employer’s budget and their employees’ diverse needs.

In contrast, working as a captive agent representing a single insurance company or agency, you may not always have the best product solution or the most competitively priced option for your client.

There’s no limit to what you can earn as an independent broker; your personal drive helps determine your financial success.

Working with a General Agency

Many independent brokers work through a general agency (sometimes also called a general agent or GA). The Word & Brown General Agency and others like us represent many different insurers, products, and services. If you want to sell products from a specific carrier, you will want to ask if your GA represents that company. A GA can help you get appointed with the companies you want to represent, so you’re able to offer clients a range of products and services to fulfill their various insurance needs.

It’s Your Choice

Is an agent or broker life the right one for you? The choice is yours. If you start out as one and want to switch later, that’s something you can do, too. Some insurance professionals start as independent brokers and become captive agents later. Sometimes, the reverse is true.

If you do pursue an independent broker career path, and you’re interested in discussing how you can take advantage of all of tools, tech, and expertise available from Word & Brown, visit our Broker Career Kick-Starter Blog or download 6 Steps to Getting Your Health Insurance License. ADD LINK If you want to phone us, call (800) 869-6989.


How Much Can You Earn as an Insurance Broker?

Find out what you can be earning as an insurance agent in our handy, up-to-date salary guide. Produced by our in-house experts, this resource is bound to help you in advancing your career.

Word & Brown Salary Guide