For today’s post I want to talk about how to buy insurance if you’re self employed.  This post will be especially helpful if you are looking at buying insurance on your own for the first time.  Buying insurance can be seem a little overwhelming and confusing at times.   By the time you read this article I will simplify the process and help you understand your options for purchasing your personal insurance policies.

Beyond the usual consideration of trying to find the lowest rates or the most comprehensive insurance policy, there is one very important aspect to buying insurance that is often over looked and not considered at all.  This consideration is whether you should use a captive insurance agent or an independent insurance agent?  This is probably the most important things you need to consider when beginning the process of buying insurance if you’re self-employed.

You have the option of purchasing insurance through 2 primary sources, captive and independent insurance agents.

Captive Agents

Simply put, captive insurance companies control or dictate how their agents sell products.   Their agents are contracted to sell only their in house products.  Examples of well known captive companies/agents would be Nationwide, State Farm or New York Life.  The agents of these companies are only allowed to sell the insurance products of this particular insurance company.

The disadvantage to the customers of these captive insurance companies is they have access to a very limited product selection.  The bottom line is that many times these captive agents are not able to offer you the most competitive rates or best products because they can not offer you any products outside of their walls.   The problem also lies in the fact that the insurance professional of the captive agency often times can’t do what is in their client’s best interests and act as a “real” fiduciary.

Independent Agents – The Case for Objectivity and Consultant Based Approach

The other way you can buy insurance is through an independent insurance agent.  I will say this up front; this is my preference.   Professionally and personally, I feel this is the best and only way to buy insurance.  Let me explain why I believe this so strongly.   It starts with the idea that an insurance agent should acting as a consultant in your best interest, essentially your fiduciary.

Independent insurance agents shop the market place of multiple (often times dozens) insurance carriers for you.  Independent agents typically have the ability to contract with any insurance carrier they choose.  Most of the time this means their customers are able to receive the lowest rate versus the rate of just one company.

These companies distribute and sell their insurance policies through independent agents.   These insurance companies have decided that it makes the most sense to offer their products through independent agents.  These insurance companies cannot control or dictate how or what the independent agent sells.  Thus, giving the meaning to the term independent agent.

Look at it this way, an independent agent is able act as a consult versus salesperson and bring you the lowest cost, most appropriate insurance policy to fit your needs.  You don’t pay the agent a dime because the agent is paid at flat rate directly by the provider when the policy is sold.  The company realizes independent agents have a number of other options so they have to remain extremely competitive to earn your business.

Aside from being extremely price competitive, independent agents have a wider selection of products for you to choose from.   The good news is the client ends up better off and with the most competitively priced product.  This is because the agent has the ability to look for the best product and doesn’t have to pressure their client to buy one product or another.  The agent can look for what is in your best interest.

There are other factors to consider when buying insurance, however don’t forget to consider how you are going to buy your insurance.