Insurance Questions and Answers: “How Much Do Insurance Agents Earn?”
Just like every other commission-based sales job in the world, the sky is the limit when it comes to an insurance agent’s income. however, it is not that simple.
Reading: How much commission does insurance agent make
There are several ways to enter the insurance industry as a sales agent and many products to master and sell. how much you get paid depends on where you start.
It’s also worth noting that, like any other sales job, you shouldn’t expect to make much money until you’ve built up a solid customer base. that’s when the money really starts to roll in because of the many renovations that will start happening at the same time.
Of course, building a sizable book of business can take 2-5 years (or much longer) depending on how hard you hit the pavement. It’s a marathon, not a sprint. you have to be in this for the long haul because it’s not just about one-time wins.
expect 10 “no’s” for every “yes”. This means you’ll probably need to “pitch” 100 leads to sell 10 insurance policies, which should be at least half the sales you’ll need to make decent money each month. If you’re not scared yet, keep reading. We’ll tell you about the different types of insurance agents and how they make their money.
How are property and casualty insurance agents paid?
Typically, an insurance agent is paid a commission, or a percentage, of the total insurance premium the insurer charges for a given policy.
Property and casualty insurance agents (auto, home and business) typically earn between 7% and 20% commission on each policy sold. if you forced us to come up with a solid number, we’d say 12% is what you can expect on average.
Example: A $1,000 auto insurance policy with a 12% commission would earn you $120.00.
Each year, assuming your customer is still happy and continues to insure with you, you’ll earn a “renewal” commission. renewals are where the money is, since you don’t have to advertise or spend time quoting the policy to get it renewed (usually).
if the customer makes the renewal payment, you get paid again… it can even happen while you sleep.
Renewal policy fees are typically slightly less than the initial fee paid to you for “new business.” for example, new business may represent 15% and renewals only 10%.
As you can see, a few years into the process of building your business “book,” renewals from previous years practically make your income exponential. there are few products you can sell that get paid every year, whether you’ve worked with the client or not.
Example: Last year’s auto policy in the example above renews ($120.00) and you sell a new auto policy the same day the following year, earning another $120.00; her income for that day is now $240.00. not a bad day at work.
The average insurance agency, if it performs well, should aim to retain 90% of the previous year’s business.
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could lose 10% of the previous year’s business due to dissatisfied customers who didn’t feel their insurance claim was handled well, so they shopped around and found cheaper insurance… or maybe their third cousin turned agent and simply changed his or her insurance policy for him or her.
How are life and health insurance agents paid?
Health and life insurance agents are paid a little differently. there is still a commission, but you pay a little more up front compared to property and casualty insurance.
There are also renewal fees, but they are paid at a much lower percentage (although it may not be less money overall than a property and casualty policy, since the premium is usually substantially higher).
Example: You sell a $10,000 whole life insurance policy and receive a 55% commission for the first year, which is $5,500. the renewal fee can be as low as 3%, still earning you a respectable $300 a year.
Some life insurance companies may pay as much as the first year’s premium as a commission and then offer no renewal money. Combinations of new and renewal commissions for a life insurance agent or health insurance agent can vary widely by company.
do you want to have an agency or work for one?
The amount of money you make as an insurance sales agent can also vary greatly depending on whether you start your own agency or advance an existing agency. Of course, there are pros and cons to both options.
In the long run, if you’re selling insurance to pay for a yacht, your goal is to own the agency.
It’s the same as any other industry. You make more money as an employer (if you’re good enough) than as an employee, but it takes more work.
owner of insurance agency
Expect to earn much less in the short term if you open your own insurance agency, since every penny of your sales revenue will be invested in keeping the bills paid and the doors open for the first two years. but, and this is a big “but”, you will make significantly more money in the long run as an agency owner… if you can stay in business.
Many insurance agencies are passed down to family members or simply bought by someone who has enough money to buy one and doesn’t want to take the time to build the business from scratch.
an agent at someone else’s insurance agency
If you’re new to the industry, you’ll probably start out as a customer service representative (CSR). If you’re good enough at the job and decide you like insurance enough, you may be able to “promote” an agent, working on behalf of your employer.
the advantage of this method is that you earn money immediately after selling an insurance policy. you don’t have to pay phone bill, rent, utilities, insurance (yes, insurance agents need insurance), etc. that’s the owner’s problem.
You might expect to get your expenses paid, and at a big enough insurance agency, a processor to do your paperwork…which is a good chunk of the job.
See also: How to Get Affordable Auto Insurance for Low-Income Drivers – ValuePenguin
The downside is that you will split your commission earnings with the owner of the agency you work for. after all, the insurance companies that offer these products will not allow “nobody off the street” to represent them and sell their insurance. if you’re new to the industry, you’ll have to ride someone else’s coattails until you get back on your feet.
what is the difference between a captive and an independent agent?
You will also have the option of being a captive agent or trying to become an independent insurance agent. Captive agents typically sell insurance for a single company, while an independent agent sells insurance for several different companies.
for captive agents, think farmers and state farms. this option is excellent for people who know nothing about insurance. pass a “sales aptitude” test and you’ll be ready to compete with these types of insurers.
Many captive agents switch to independent agents after sufficient time in the industry, as captive insurers typically have a limited “appetite” from an underwriting standpoint. will turn away many clients if state farm doesn’t want to insure the person because they are “too risky”.
After you become a successful captive agent and gain confidence, you may decide you want the ability to secure anyone who walks through the door. this means you want to be an independent agent.
It’s much more difficult to become an independent agent, since you actually have to prove that you know what you’re talking about to represent multiple insurance companies.
You will most likely need to show that you have previously sold a large amount of insurance to qualify for a contract to sell insurance products independently. commissions are higher here, but you have to satisfy the requirements of multiple insurers from a policy standpoint.
You can represent 10 companies, and each of them could expect you to sell a minimum of five policies per month, or they will terminate your contract and not allow you to sell their products anymore.
so going freelance will likely require a few years of experience in the industry, starting with either working with an existing freelance agency or buying one.
how much do insurance agents earn?
As we explained earlier, there are many different types of agents and pay depends on the specific insurance business you work for. however, we can offer you some estimates.
Putting aside the differences between captive and independent agents, the Bureau of Labor Statistics states that the average salary for an auto insurance agent is $50,000. however, since much of the salary comes from commissions, the annual salary of insurance agents varies significantly. a successful insurance agent can earn more than $100,000 per year.
Independent agents have the most flexibility in terms of purchasing power and typically receive around 15% commission on the sale of insurance plans. Captive agents who work for a single insurance company earn less with a commission of around 5% to 10%. the commission structure will vary from company to company.
what is the end result?
To summarize, there are several different ways to make money as an insurance agent, and what you put in is what you get, just like any other sales job. don’t expect it to be easy.
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