What does a life insurance agent earn when you acquire a life insurance policy? We’ll answer the frequently asked “How do life insurance agents get compensated” question today. In addition, we’ll go over some ways to make sure your agent is looking out for you and not just their pocket. Hopefully, before you purchase your coverage, you’ll have a greater understanding and be better prepared.
How Do Life Insurance Agents Get Paid?
This is one of the most frequently asked inquiries by life insurance purchasers, and it’s an excellent question to ask. Shoppers want to know if their agent gets a commission or any hidden components to the sale.
When you buy life insurance, the agent gets a commission. This is money that they get for finding your insurance. The commission is based on how much the premium of your policy is. Therefore, there are no extra costs or fees when you work with an agent.
Life Insurance Commissions
It shouldn’t come as a surprise that most life insurance agents make their living through commissions. Did you realize, though, that there are several other methods they may make money?
Commissions, service fees, financing arrangements, and bonuses are all possible ways to make money as an insurance agent.
Life Insurance Commission Payout
Life insurance agents get paid a one-time commission based on how much of your total premiums they take from you for the first year. Life insurance companies have commissions paying agents up to 115% of your first year’s premiums.
Which Type Of Life Insurance Agent Is Best To Buy From?
There are two types of life insurance brokers available to you: captive agents and independent brokers.
Captive Life Insurance Agents
A captive insurance agent is someone who only works for one firm. The captive agent can only promote the goods offered by this single organization. Commissions and/or a salary may be paid to the captive agent. There are a few things to consider when purchasing insurance from a captive agent as a customer.
- Life insurance plans are limited to only the products from that company.
- The products may be more expensive when compared to other carriers.
- Always compare rates from multiple life insurance companies to find the best policy at the cheapest cost to you.
Captive Life Insurance Companies
- Colonial Penn Life Insurance
- Allstate Life Insurance
- American Family Life Insurance
- Erie Life Insurance
- AAA Life Insurance
- Geico Life Insurance
- Globe Life Insurance
- State Farm Life Insurance
- USAA Life Insurance
- Progressive Life Insurance
- Farmers Insurance
Independent Life Insurance Agents
An independent life insurance agent does not represent any one insurance company. However, because the independent agent represents several life insurance companies, they can offer a wide variety of life insurance policies.
Because independent agents can offer more than a single insurance company, they will generally get the best bargain for their clients. Independent agents can also help find the best policies for pre-existing medical conditions such as:
- high blood pressure
- weight issues
- smokers
- diabetes
- high cholesterol
The key is to discover the best product for your circumstances. Unfortunately, this can’t be accomplished with a Captive Agent since they only have access to one company.
Who Offers The Cheapest Price?
When considering coverage, life insurance rates are identical. That implies that the prices remain fixed regardless of whether you go through an independent agent or a captive agent. Life insurance prices are controlled and determined by each state’s Department of Insurance.
What You Should Know About Agent Commissions
Because the first-year premiums you pay go to your agent, they may try to persuade you to purchase a more expensive policy. For example, some life insurance agents have attempted to push for a more costly coverage type, such as permanent life insurance rather than term life insurance.
Make sure your broker gives you a variety of options such as:
- Term life insurance
- Life insurance without a medical exam.
- Universal life insurance
- Whole life insurance
Related Reading
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Frequently Asked Questions
How much do life insurance agents make?
Life insurance agents make a commission on the policies they sell, so their income can vary greatly depending on how many policies they sell and the commission rate. The average life insurance agent makes $47,860 per year, but the top 10% of agents make over $100,000 per year.