First, consumers must determine if they want to do business with a captive or non-captive agent - some insurers only do business through captive agents; others do business only through independent agents; and some use a combination.
Second, prospective life insurance clients must assess the strength of the insurers that an agent represents - online directories and financial rating sites can help to estimate a company's fiscal stability. It is the insurer, not the agent, who will be called on to provide the promised financial benefit.
Consumers have the ability to be very particular when it comes to choosing an agent, or to purchase directly from a company if an agent does not suit their needs. The new, growing market for life insurance provides consumers not only more choice when it comes to their policy options, but also a wider selection of qualified agents and companies to select from.
What this means for insurance consumers is that there are a vast array of life insurance companies and independent agents which exist in the market, giving them more choice than ever before when it comes to choosing an underwriter.
The two basic forms of life insurance are term and permanent. Term life insurance is designed to economically provide a death benefit should that event occur during a set period of time. Permanent life insurance can provide additional financial benefits and may be more advantageous over a longer period of time. There are a number of variations in the designs of both term and permanent life policy types providing a broad range of financial tools to help meet your particular needs and preferences.
In addition to the underwriting of traditional life insurance, many companies have also made the shift to selling what are known as annuities. Annuities are instruments that are intended to make periodic pay outs either over a fixed period of time or over the lifetimes of one or more designated person. The pay-outs can either begin immediately after the contract is issued, or can be deferred so additional funds can be added over time. As with life insurance, annuities come in a variety of flavors.
The function of an agent or company is to seek out a policy or annuity product suited to the needs of their insured, and to relate the terms of that agreement in a way that is easily understood. Agents can help consumers streamline the insurance purchasing process.
Insurance agents are required to hold a license from each state in which they sell insurance. The licensing requirements, including continuing education classes, are primarily set by the state in which the agent resides. Other states will generally issue non-resident agent licenses on a reciprocal basis, and the agents are required to follow the insurance laws and offer policies approved or permitted for sale in the state where the consumer is located.
Agents will fall into one of two categories reflecting the relationship they have with the insurers they represent:
A captive agent is one who works for a specific insurance company (or group of related insurers), and all sales they make are for that provider. Captive agents are typically prohibited by their agency contracts from selling insurance for other companies.
A non-captive agent is also known as an independent agent and is not limited to selling the products of any specific company. While non-captive agents will usually be authorized to sell for a number of companies, they often have one company that serves as their preferred carrier for a given type of policy or risk category.
In either case, life insurance agents legally represent the insurer and are generally compensated by the insurer based on the type of product they sell and the related premium expense.