Understanding Insurance Agent Commissions

Hands Giving & Receiving Money

Understanding Insurance Agent Commissions
By: Michael Miller, Smart Choice
® State Director

Knowing how agent pay and commission works can be tricky, whether you’re an experienced independent insurance agent, a producer on an agency’s payroll, or if you’re considering making a career change into the insurance industry. Here’s a quick run-down of the different ways insurance agents get paid so you can decide the best option for you.

7th Best Business Job
This year, US News & World Report ranked “Insurance Agent” as its seventh best business job in the United States. Half of the insurance agents in the country are independent, while about a quarter work directly for an insurance carrier as a captive agent.

While some agents are salaried, most earn part or all of their incomes on commission. This means a lot of an agent’s time is spent finding and following up with leads. Without the right support, it can be tough for new agents—or newly independent agents—to make a living off commissions alone.

How Commissions Work
The amount you earn in commission as an insurance agent depends on how much insurance you sell and the type of insurance you sell. An agent selling life insurance, for example, may make between 30 and 90 percent of a client’s first-year premium. Commissions on premium renewals are typically lower. Agents selling life insurance may only make 3 to 10 percent on life insurance renewals.

The commission you earn also depends on the carriers you work with. Some carriers have more generous commissions (and bonuses) than others. Joining a cluster group can help you gain access to some of the industry’s more generous commissions. Members typically split commissions with their cluster group. Each group splits commissions differently, so do your research carefully before you commit.