How Much Commission Does My Agent Make from My Life Insurance Purchase?

How Much Commission Does My Agent Make from My Life Insurance Purchase?

There are several factors that determine the commission of a life insurance agent. One of them is the amount of life insurance he/she is selling and the commission plan of the company.

Here, you will learn how much your life insurance agent makes.

Salary or Commission: How Are Life Insurance Agents Paid?

Licensed life insurance sellers usually have varying compensation agreements and may even hold a number of positions—which influences the amount they make. 

If the representative is a contracted employee, they may get a salary or a commission. Many agents are on contract so they are primarily paid through commission. 

7 Factors That Determine How Much Money a Broker or Life Insurance Agent Makes

  • Client base size
  • The number of companies they work for
  • Level of experience
  • The number of categories they are licensed to sell
  • The nature of their compensation agreement
  • The expenses they have to pay using the commission

There are still other factors that may influence the amount they make from your policy. However, the above factors give you a rough idea of why one agent makes more than another. 

Will the Agent’s Commission Influence the Cost of Your Life Insurance Policy?

The life insurance business is quite competitive. For every policy that an agent sells, there are many that get rejected or are not sold. Life insurance companies take this into account and, therefore, the commission may appear high because the loss needs to be accounted for. 

The premium of your life insurance will not be affected by commission since the commission is already included in the premium. 

Examples of Different Payments

A life insurance agent may work with a single company or several that pay primarily using commission. For many of these agents, their base salary is low. Most of their income is expected to come from commission. 

Another model may consist of a low percentage commission and a high base salary.

Average Salary for Insurance Agents

Going by the data provided by the Bureau of Labor Statistics, insurance sales agents make a median pay of $24.03 an hour or $49990 per year.

Different Life Insurance and Commission Rates

Life insurance policies come in different forms. Some types have a higher commission that others. Large, long-term life policies tend to pay more commission. 

Policies are divided into two major types: cash-value/whole life policies and term life. Term insurance is only for a specific duration of time (5, 10, 20 years, etc.) while whole life insurance is for your entire life.

How to Know How Much Your Personal Finance Planner or Life Insurance Agent Is Making Off You

The simplest way is to ask. Before you choose a financial planner, ask these questions: 

  • What is the nature of your compensation?
  • Do you take referral fees?

Knowing the commission is important but here are other factors that should influence your decision:

  • The amount of time the agent has spent with you.
  • Their explanations and answer to your questions.

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