An insurance broker is a professional who earns money by selling insurance policies to individuals or companies. The fees they receive are usually between 2% and 8% of the premiums, as regulated by the state. Brokers can offer a variety of insurance products, such as health insurance, homeowners insurance, accident insurance, life insurance, and annuities. Life insurance agents typically receive between 30% and 90% of the premium paid for the first year of a policy. For subsequent years, they can get 3% to 10% of the annual premium, also known as renewals or final commissions.
Most insurance agents make money through commissions based on the premium charged for the policy. The base commission is the standard fee that an insurance agent will earn for the policy sold and is expressed as a percentage of the premium. The commission rate depends on the type and amount of insurance sold. For example, an auto insurance policy may have a 10% commission rate while a general liability policy may have a 15% commission rate. While some captive agents are salaried, most agents and brokers rely on commissions for income. Independent agents are paid primarily through commissions.
The more customers they serve, the more money they make. And as those customers renew each year, independent agents continue to charge fees for those policies. Captive agents are employed by one specific company and can only sell that company's products. This means they cannot refer customers elsewhere if they cannot sell them a policy. However, they may be salaried instead of relying on commissions. Insurance brokers represent consumers rather than insurance companies and cannot link coverage on behalf of the insurer.
They help people compare different insurance plans and find the best and most affordable policy. The average commission for an auto insurance agent usually ranges between 8 and 15 percent for the first year, although 15 percent is not typical. Insurance brokers may also receive additional payments when they charge a middleman commission. Life insurance agents help families, businesses, employers, and other parties protect themselves against financial loss when someone dies. They make money through commissions based on the premiums charged for policies. The commission rates are approximately the same for brokers as they are for agents. In order to become an insurance agent or broker, you must be properly licensed in your state.
Insurance companies often publish job offers by geographical area to accommodate the high turnover rate of agents. Finally, some agents may receive performance-based commissions that reward certain metrics such as money from premiums sold, policyholder retention or growth of the insurance portfolio. Taking a job with the wrong insurance company can burn you down and ruin your dreams of a promising career. As the older workforce gradually approaches retirement, a new generation of insurance agents can move the industry forward.