Insurance agents are paid a commission from their insurance company for each policy sold. This commission, also known as a “charge”, is included in the cost of the policy and is expressed as a percentage of the premium. The base commission rate varies depending on the coverage and line of business sold. For example, an insurance agent can make a 10% commission if they sell an auto insurance policy, while they can make a 15% commission on a general liability policy.
Independent agents are paid primarily on a commission basis. The more customers they serve, the more money they make. Life insurance agents are paid a one-time fee based on the total amount of your premiums they take away from you during the first year. Life insurance companies have commissions that pay agents up to 115% of first-year premiums.
Choosing the right insurance plan can be complicated, and studies show that many people choose a plan that is not optimal when based solely on their judgment. Understanding how life insurance agents are paid allows you to spot signs that an agent may be acting in your best interest rather than your own. For new agents, it can be very difficult to be appointed by insurance companies without an existing business portfolio and a solid business plan. The more experienced an agent has, the better they can anticipate and meet a customer's needs.
Much of the success you have and the commission you earn as an insurance agent comes from lead generation. A life insurance policy provides financial protection for your family, ensuring that they have the money they need to cover cremation or burial expenses and to pay off debts owed. The commission benefits are reduced to you being your own boss, owning what you earn, and being able to control it with your level of effort and ability to sell insurance. However, this proactive approach will ensure that you always have the most competitively priced insurance.
An insurance broker is a professional who acts as an intermediary between a consumer and an insurance company, helping the former to find the policy that best suits their needs. Agents striving to build a strong business portfolio can earn a hefty annual salary simply from renewals, and constantly adding to their business portfolio can lead to exponential revenue growth. Having a firm grasp of how insurance agents make a profit is beneficial to aspiring agents, consumers, and everyone else.