How much does a life insurance agent make? Do life insurance agents receive the highest-paying sales job in the industry?
Apart from the compensation, we will delve deeper into what it takes to be triumphant in the profession, along with the benefits and drawbacks.
If you’re contemplating being a life insurance agent as a potential career, then this piece can serve as a helpful guide.
For those already in the discipline, this article can give you an idea of how much your counterparts across the country are earning. Read on and discover more about a life insurance agent’s earning potential.
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).
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How Do Commissions Work?
An insurance agent’s commission percentage tends to vary depending on the type of policy they’re selling: whole life, flexible premium or universal life, and term insurance.
Whole Life
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 earned by the agent from the whole-life policy, term insurance riders add coverage to the policy at a low cost.
- Cash-value riders: In the early years of a policy’s life, cash value is increased by cash-value riders. The commissions on cash-value riders are much lower than those on base policies.
Universal Life
Any premiums that you pay in the first year up to the amount of the set premium usually have a commission of 100% or more. The agent’s commission rate lowers for any premiums you pay above the target level in the first year.
Term Insurance
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.
How Much Does a Life Insurance Agent Make?
Life insurance agents make, on average, $62,000 to $76,000 per year.
The most recent occupational employment and wage statistics (OEWS) from the Bureau of Labor Statistics (BLS) estimate the yearly average to be close to $77,000, although this figure applies to all varieties of insurance agents.
How Much Life Insurance Agents Make, Pay Scale
| PERCENTILE WAGE ESTIMATES (LIFE INSURANCE AGENTS) | |||
|---|---|---|---|
| Percentile | Annual wage | Monthly wage | Hourly wage |
| 10th | $39,000 | $3,250 | $19 |
| 25th | $49,000 | $4,083 | $24 |
| 50th (Median) | $62,552 | $5,213 | $30 |
| 75th | $79,000 | $6,583 | $38 |
| 90th | $99,000 | $8,250 | $48 |
How Much Life Insurance Make Agents Make Based on Experience Level
| WAGE ESTIMATES PER EXPERIENCE LEVEL (LIFE INSURANCE AGENTS) | |||
|---|---|---|---|
| Experience level | Annual wage | Monthly wage | Hourly wage |
| Entry | $37,500 | $3,125 | $18.03 |
| Mid | $64,100 | $5,342 | $30.84 |
| Senior | $73,100 | $6,092 | $35.12 |
In this guide on how much insurance agents make, you can also view the wage estimates for insurance agents generally, along with the highest- and lowest-paying states and regions in the US.
How Much Does a Life Insurance Agent Make – State-By-State Breakdown
The location of an insurance agent is one of the many variables that affect their salary.
The standard pay for agents also varies because each state has its own regulations governing how insurance products are sold and who is authorized to do so, including licensing requirements.
The best and worst states for life insurance agents are listed below.
How Much Does a Life Insurance Agent Make – Top-Paying Cities
These are the highest-paying cities in the US when it concerns life insurance agent salaries.
How Do Life Insurance Agents Get Paid?
A life insurance agent’s primary source of income is commissions.
Typically, front-loaded commissions for agents range from 40% to up to 115% of the policy’s first-year premiums; however, the amount for renewals drops sharply to around 1% or 2%. After the third year, the policy is in force, and some agents no longer receive commissions.
However, commission rates also depend on the kind of life insurance policies that are sold.
Whole Life Insurance Commission Rates
The commission rates for whole life insurance plans are the highest, frequently exceeding 100% of the total premiums for the first year of the policy. The age of the policyholder affects the precise percentage.
Universal Life Insurance Commission Rates
For universal life insurance plans, agents typically receive a commission equal to at least 100% of the premiums the policyholder pays in the first year, up to the amount of the target premium.
Any premiums the insured pays in the first year that are higher than the target level, however, result in a rate reduction.
Term Life Insurance Commission Rates
The lowest commissions are paid on term life insurance policies, which frequently represent a percentage of the annual premiums between 30% and 80%.
After a loved one passes away, life insurance is essential in giving families some degree of financial security.
Families can use this kind of coverage to pay off loans and debts and cover daily expenses with the right policy.
See our in-depth guide to life insurance for more information on how this form of protection functions.
Agents for life insurance companies can also be paid staff members of an insurance company. Although these agents are paid a base salary and have access to benefits, they frequently have to meet a monthly sales quota.
Factors that Impact How Much Insurance Agents Make
There are three major variables that impact how much life insurance agents make. They are:
1. Type of Agent
The commissions that captive life insurance agents receive are typically lower than those received by independent life insurance agents, who work with a variety of insurance carriers.
The problem is that independent agents frequently bear the cost of their own operating expenses, including rent, office supplies, and advertising.
2. Type of Policy
Whole and universal life insurance commission rates are frequently significantly higher than term life insurance commission rates.
However, agents need to make sure that their customers can afford premium payments.
Insurers may ask agents to repay a portion of their commissions if the policyholder stops making payments and lets their policies lapse within the first few years.
3. Location
For those wishing to sell life insurance policies, each state has its own rules and regulations, and these can have an impact on how much an agent makes there.
Additionally, compared to a small town with fewer residents, a large city with a larger population provides life insurance agents with more opportunities to sell policies.
Is Being a Life Insurance Agent a Good Career?
The decision to become a life insurance agent comes with both benefits and drawbacks. The following are a few benefits and drawbacks:
Advantages
Minimal Entry Barriers
Being a life insurance agent doesn’t necessarily require a college degree, although some insurance companies and agencies favor applicants with one.
For new agents, the majority of employers have put in place training programs to get them ready for work. To sell insurance products, however, all insurance agents must be licensed.
Multiple Job Opportunities
If you quickly search online for insurance jobs, you will find hundreds or even thousands of openings for life insurance agents.
As long as there is demand for insurance policies that can offer families financial protection, agencies will continually look to hire new personnel.
Strong Potential for Earning
Since commissions make up the majority of how life insurance agents are compensated, those who exhibit a strong work ethic and are prepared to go above and beyond to build relationships with clients have more opportunities to increase their income.
Opportunity to Make a Positive Impact
While losing a loved one is never pleasant, it can be gratifying to know that you have made a significant contribution to reducing the financial stress on families during this difficult time.
Chance to Work with the Biggest Names
You may get the chance to work for some of the most well-known companies in the nation by pursuing a career as a life insurance agent.
To find out the biggest names in the sector, you can look at our most recent rankings of the biggest life insurance companies in the US.
Disadvantages
Commission-Based Earnings
Depending on the circumstances, this might be a plus or a negative.
With a solid clientele and years of industry experience, life insurance agents have more opportunities to close deals, which increases their income.
While working long hours, industry newcomers might find it difficult to find customers in a fiercely competitive market.
Sales Challenges
Selling life insurance is not an especially simple process. Since most people dislike thinking about their own mortality, discussing life insurance and what it covers can be challenging.
This combined with the fact that such policies do not offer instant gratification, unlike, say, auto insurance, makes for a product that can be difficult to market.
Limited Paid Time Off
Independent life insurance agents frequently do not have access to the full spectrum of employee benefits, which results in them having a smaller amount of paid time off.
Additionally, taking time off will require them to spend less time developing client relationships and prospecting, which could reduce their income.
Rejection and Disrespect
Being a life insurance agent requires a lot of bravery and thin skin. Insurance agents will come into contact with individuals who will view them with contempt and disrespect throughout the course of their careers.
Before they can sell one policy, they might additionally encounter numerous rejections. That is why being a natural leader and possessing a hard exterior are essential for success in this industry.
How Can You Become a Successful Life Insurance Agent?
The kind of relationship you develop with potential clients will have a significant impact on your success as a life insurance agent.
Here are some tips from professionals in the field that can assist you in building positive professional relationships with clients.
- Practice good customer service: To encourage potential customers to purchase your products, practice providing good customer service. Successful life insurance agents consistently deliver high-quality service and are aware of the particular needs of their clients.
- Create a reliable professional network: Building trusting relationships with customers is the foundation of selling insurance, so you must first pay attention to this area before focusing on sales. Sales could come after you gradually expand your network.
- Determine client needs: Life insurance agents must be empathetic in order to determine the level of protection that their clients require. The majority of people are already aware of the need for some sort of financial security, though they may not always be aware of the precise types of insurance they require.
- Leave a professional impression: Building trust with clients can be greatly facilitated by dressing and communicating professionally. The location of customer meetings for independent agents who operate outside of an office setting is crucial in establishing professionalism.
- Recognize that selling life insurance is a long-term endeavor: Attempting to sell policies quickly will only damage your clients’ trust. Instead, concentrate on fostering relationships. Agents who are persistent and patient are more likely to land a long-term client who might recommend you to additional potential clients.
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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.
Changes can happen quickly in the field of life insurance.
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