What is the salary of a life insurance agent? You have come to the right blog if that is the question on your mind.
Salespeople for life insurance are paid a portion of the annual policy premiums collected beginning with the first year.
More money, or “commissions,” is paid to some life insurance salespeople than to others.
Although most states forbid agents from rebating commissions, there are still ways to reduce costs. Discover how commissions impact your insurance premium and become a wiser shopper.
What are Life Insurance Commissions?
“Captive” insurance agents are those who only sell life insurance from a single company. Because they might also receive other perks like health insurance and retirement accounts, they might get lower commission rates.
Other salespeople, known as “brokers,” are not tied to any one company and are eligible to receive commissions that are up to 50% higher than those of captive agents.
The cost of the insurance policy includes commissions and other costs. The commission for the same policy from the same company is included in the premium regardless of where you purchase it (agent or broker).
However, commission cap regulations might exist in some states. The New York State Department of Financial Services, for instance, sets a limit of 99% on first-year commissions.
How Do Commissions Work?
Depending on the type of policy they are selling—whole life, flexible premium or universal life, and term insurance—an insurance agent’s commission percentage frequently varies.
The commissions on whole-life premiums are typically the highest; they typically account for more than 100% of the first-year premium, though the precise percentage may vary depending on the insured’s age.
Therefore, it is likely that the insurance company will pay at least that much for a first-year commission if an agent sells you a policy with a $3,600 first-year premium.
There are typically at least two different types of riders on whole-life policies that can lower the commissions included in the premium you pay:
- Term insurance rider: When compared to the commissions the agent receives from the whole-life policy, term insurance riders add coverage to the policy at a low cost.
- Cash-value riders: A policy’s initial cash value is raised by cash-value riders. The commissions on cash-value riders are much lower than those on base policies.
The commission on any premiums you pay in the first year up to the target premium is typically 100% or higher. Any premiums you pay in excess of the target level in the first year result in a reduction in the agent’s commission rate.
For term-life insurance, the commission is calculated as a portion of the annual premium. These commissions are probably many times less than what a broker would make from a whole-life or universal policy.
What’s the Best Policy for Me?
In addition to protecting your family in the event of your death, life insurance can be used to raise a policy’s cash value.
The best course of action depends on your resources and environment. Here are some pointers on how to choose life insurance more wisely.
Anyone who is trying to sell you life insurance needs to give you an example of the values and advantages over the course of the contract.The example will demonstrate the:
- Annual projected premium
- Death benefit when due.
- Cash accumulation value
- Starting point or target premium
- Riders included in your policy
Read the footnotes for the examples. Although they are frequently lengthy, they contain important details about the premiums and benefits.
It’s recommended to view examples from various companies, especially for term insurance. The market for term insurance is fiercely competitive, and some providers charge lower premiums than others.
Online calculators may be useful for term insurance, but because there are so many different options for whole-life or universal insurance, they are ineffective.
Request that the agent or broker breaks down the premiums for you into a target or base premium, excess, and riders if the illustration is for whole life or universal life.
Ask to see an illustration with term riders and excess premiums if they are not displayed. Request to see a product that has them if they are not offered.
The lowest premium isn’t always the best choice depending on what you’re trying to achieve. The greatest possible value for your premium dollar is what you’re after.
What’s the Average Insurance Agent Salary?
A base salary and commission are frequently combined for insurance agents.
Nevertheless, depending on the insurance provider you write policies for and how your contract or employment is set up, the proportion of your income that is earned by salary vs. commission varies.
Most insurance agents earn an average of between $47,698 and $58,914 per year, including salary and commission.
The U.S. Bureau of Labor Statistics reports that the lowest 10% of insurance agents made less than $29,000, while the highest 10% made more than $127,840.
Accordingly, even the lowest 10% of insurance agents make close to the average American household income, while the highest 10% of agents make more than four times that amount.
The ability of an insurance agent to close new insurance policies has a direct impact on their overall income.
You must research the elements that can improve your performance as an agent if you want to have the best chance of earning at least the median agent income.
What Factors Influence an Agent’s Salary?
When it comes to an agent’s annual salary and overall income, which includes commission, there are many moving parts.
Salary, commission structure, and the kind of insurance sold are some variables that are predetermined from the beginning. Others, like salesmanship and customer service abilities, are more individualized.
Before working for an insurance company, it’s worthwhile to educate yourself about the insurance industry, even if you have your heart set on becoming an insurance agent.
Let’s take a look at a few elements that could have a significant impact on your insurance agent income and help you avoid wasting a lot of time and energy in the future.
Commission sales account for the majority of how much money insurance agents make overall. Total sales volume is one way to really differentiate yourself, regardless of the kind of insurance you sell or the businesses you represent.
Sales can be made using either leads you generate on your own or leads from a lead provider like Nectar. To ensure that your closing rate is as high as possible, you’ll also need to learn a few sales techniques.
The Type of Insurance You Sell
Do you realize there are various kinds of insurance agents?
There are many different types of insurance, but property and casualty agents—those who specialize in home and auto insurance—are the most prevalent.
Property and casualty agents frequently offer life insurance alongside home and auto insurance, but they are not required to offer health insurance. Agents for life insurance may additionally offer health insurance, and vice versa.
The majority of significant insurance providers offer both life insurance and property and casualty insurance. State Farm, Farmers, American Family, Farm Bureau, Progressive, Geico, Liberty Mutual, and other insurers fall into this category.
In contrast, insurance agents who specialize in life insurance typically earn slightly more than those who also sell home and auto insurance.
The trade-off is that life insurance policy sales provide lower residual commission rates on home and auto policies than home and auto agency owners typically receive.
So, over the course of their careers, life insurance agents spend more time selling policies, whereas agents who provide home and auto insurance spend more time on customer service and retention.
Your potential income is affected by more factors than just the type of insurance you decide to sell (and, consequently, the insurance company you decide to sell for).
Your daily priorities, residual income rates, and potential for a certain lifestyle are also impacted.
Are You a Captive Agent or an Insurance Broker?
While an insurance broker is permitted to write policies for multiple insurance companies, a captive insurance agent only works for one insurance carrier.
At first glance, it might appear that writing policies for multiple companies is the best course of action.
Nevertheless, each route has benefits and drawbacks. Both give agents the chance to make a good living. The “right choice” really just comes down to personal preference.
On the sale of home and auto insurance policies, captive agents receive a residual commission (per year) between 5% and 10%. Typically, they are only permitted to sell for the one insurance provider they are affiliated with.
When their primary carrier cannot or will not provide coverage to a particular client, some captive carriers do permit agents to sell through other small insurance carriers.
Captive agents can save time and manage policy sales and services more easily because they only need to learn one insurance sales system.
Additionally, captive agents have a well-known national brand name, which frequently generates significant amounts of sales on its own.
Examples of insurance providers include State Farm, Farmers, American Family, Farm Bureau, and Shelter Insurance.
Since they are legally “on their own,” insurance brokers are able to represent any number of insurance providers. But this might be a little deceptive.
In order for an insurance carrier to accept a new broker to write policies for them, many of them have sales and volume requirements.
To get around this obstacle, a lot of brokers decide to join a brokerage group, which gives them access to the group’s list of carriers because the volume and total sales of the group are taken into account when determining the carrier’s requirements.
On the sale of auto and home insurance policies, insurance brokers typically receive a residual commission of 15% or so.
To work with a brokerage group that has a single platform connected to all associated insurance companies, they must either learn multiple sales platforms (one for each insurance company they represent).
Brokers have more businesses, regulations, and procedures to learn in either scenario.
Moreover, they do receive some business through national brand recognition, but it’s not as much as captive agents do.
These brokers make up for this fact by charging higher commission fees and having the freedom to “shop” among various insurance providers in order to provide their clients with the best possible policies, which can boost closing rates.
Examples of independent insurance brokers/companies include Geico, Progressive, Nationwide, Hartford, Liberty Mutual, and Farmers Union.
How to Earn More Money as an Insurance Agent
One of the best things about being an agent is that you can decide how much money you make at the end of the day. The rest is up to you once you’ve decided on the insurance product you want to sell and the company(ies) for which you sell.
Drive, creativity, authenticity, and charisma are characteristics of people who typically succeed in the insurance industry; these qualities can all be developed and improved over time.
You should also learn a few very crucial, specific techniques and processes.
Focus on how you generate leads, follow up with them, and then work hard to keep them as customers if you want to increase your sales success and pay.
Work with a Lot of Leads
The key to your success as an agent is leads. And you need a ton, really as many leads as you can get. Joining networking organizations, such as your local Chamber of Commerce, will help you achieve this.
Visit local real estate agents, auto dealers, and mortgage lenders frequently. Create an email list for ongoing marketing.
Consider buying top-notch insurance leads. Whatever it takes, do it to bring customers in.
Follow up with Leads Immediately
As soon as you receive an insurance lead, follow up right away. You have a nearly seven-fold greater chance of closing the sale if you follow up within the first hour than if you do so even an hour later.
When you partner with Nectar, we give you access to live insurance leads who have shown interest in what you have to offer. Additionally, you can choose the ideal time to receive your leads so that you can follow up right away.
Become Stellar at Customer Retention
Insurance agent commissions are primarily derived from residual policies or those that renew annually. Customer retention is therefore crucial.
Develop your customer service abilities. Get really good at listening to people, reading books on the subject, and recording thorough notes on clients in your CRM (customer relationship management software).
After all, it costs five times less to keep an existing customer than to find a new one.
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The Bottom Line
The premium does not increase because the commissions for life insurance products are already included in the premium.
Look carefully at the illustrations, inquire about premiums and riders, and consider more than one company to get the best value for your premium dollar.
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