Updated: November 8, 2024
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Life insurance agents earn income primarily through life insurance commission structures, which vary depending on the type of policy sold. Most agents receive a commission on life insurance from the premiums policyholders pay.
Typically, agents earn larger commissions in the first year of a policy and smaller ongoing commissions after that. Agents don't charge policyholders directly for their services. Instead, the insurance company factors commissions into the overall pricing of the policy.
A life insurance agent helps individuals and families secure financial protection by guiding them through the life insurance selection process. These professionals assess their clients' unique needs and recommend policies that align with their financial goals, family circumstances and future plans.
Beyond selling policies, licensed life insurance agents assist with policy applications, explain coverage details and ensure that clients understand the policy terms. They also provide ongoing support, ensuring policies remain in good standing and helping clients navigate changes or renewals.
There are two primary types of life insurance agents:
Life insurance agents must adhere to ethical standards, prioritizing their clients’ best interests. While not all states require agents to disclose their commission details, some states have stricter regulations mandating transparency when clients request information on life insurance agent commission rates. Check your state regulations to clarify whether consumers can request the disclosure of an agent's commission on life insurance.
Agents earn money mainly through commissions on life insurance policies, which vary based on the type of policy sold and the insurer. Here are different life insurance commission payout methods:
Single-premium life insurance policies differ from traditional ones because the policyholder pays a large upfront premium instead of monthly or annual payments. Agents earn a one-time commission, usually a percentage of the total premium. While the commission on single-premium life insurance is lower than ongoing payment policies, the large upfront premium allows agents to earn substantial commissions in one lump sum.
The calculation of a life insurance agent’s commission depends on several factors. Understanding these variables enables agents to anticipate their earnings and strategize to maximize their life insurance agent salary.
Type of agent
Typically, captive agents who work for a single insurance provider receive a standardized commission structure from that company. Independent agents may have access to different life insurance commission payout structures depending on the insurers they represent, potentially allowing for more competitive commission rates. This flexibility can increase an independent life insurance seller's salary.
Commission variability
Commissions vary based on the type of policy. For instance, whole life insurance commission rates are generally higher due to larger premiums and the policy's long-term nature. Commission on term life insurance policies tends to be lower because these policies are shorter in duration and have lower premiums.
Geographical differences
Agents in regions with higher demand for life insurance may earn more due to market conditions. Areas with higher average incomes or a greater need for coverage often result in higher life insurance salesman salaries due to better commission opportunities.
Sales volume
Agents who consistently sell more policies or meet volume targets can earn additional bonuses or higher commissions. This can significantly impact an agent’s earnings and contribute to making money selling life insurance, increasing their total income beyond the average life insurance commission.
Experience and carrier
Experienced agents typically command higher life insurance agent commission rates, especially when working with top-tier insurance companies. These agents are more skilled at retaining clients and navigating complex products, which can lead to greater policy retention and higher overall earnings. This factor also contributes to a more competitive life insurance agent income.
Persistency bonuses
Agents may also earn persistency bonuses tied to how long a policy remains active. The longer a policy stays in force, the more bonuses agents may receive. This may motivate agents to focus on client satisfaction and retention, as these bonuses can significantly boost their income over time.
While commissions on life insurance are the primary income source for most life insurance agents, there are other ways they get paid:
Some captive agents, especially those working for a single insurance company, may receive a base salary in addition to commissions. This ensures steady income, even if commissions fluctuate. For these agents, the salary from selling life insurance combines guaranteed salary and earned commissions.
Agents may also benefit from profit-sharing programs in certain agencies. These bonuses are based on the agency's overall performance, distributing a portion of the profits to agents who contribute significantly to sales. This arrangement supplements the average commission for life insurance agents and incentivizes long-term success.
The overall average annual salary for life insurance agents is $79,700 ($38 per hour), according to the Bureau of Labor Statistics. The average annual income for life insurance agents employed by insurance carriers is $83,430 ($40 per hour).
A common misconception is that working with a life insurance agent increases premiums. In reality, life insurance commissions are included in the policy's premium, so you don’t pay extra for using an agent. The insurance company pays the commission on life insurance directly to the agent, meaning the premium remains the same whether or not the policyholder uses an agent.
Insurance companies factor in commissions as part of their operating costs when pricing policies, so agents' earnings are part of the overall premium, not an additional cost to the buyer.
Some carriers offer no-load life insurance, with no sales commissions or typical agent fees usually included in traditional life insurance premiums. These policies allow the policyholder to deal directly with the insurance company. Since the insurer doesn’t pay commissions, they can offer the policy at a reduced cost. However, policyholders may have to pay a service fee for administrative tasks that an agent usually handles, such as setting up or managing the policy.
Here are answers to common questions about how life insurance agents get paid.
The average life insurance agent's salary is about $79,700 annually. An independent life insurance agent's salary can be more or less depending on their location, experience and sales volume.
Agents earn primarily through life insurance sales commissions. They receive a significant portion of the first-year premium and smaller ongoing commissions in subsequent years. Some agents may also earn bonuses or salaries.
Life insurance sales commission is calculated as a percentage of the policy’s premium. Agents typically receive 40% to 100% of the first-year premium as renewal commissions and smaller percentages in the following years.
About Mark Fitzpatrick
Mark Fitzpatrick is a Licensed Property and Casualty Insurance Producer and MoneyGeek's Head of Insurance. He has analyzed the insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. He has been quoted in several insurance-related publications, including CNBC, NBC News and Mashable.
Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.
