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How does a life insurance agent get paid?

Question: Can you tell me how a life insurance agent gets paid? Does it affect my premium?

Life Insurance No Exam.biz Answers: Whether a life insurance agent works for a specific insurance company (captive) or is an independent, he earns his money from the sale of an insurance policy. Those earnings are in the form of a commission paid directly by the insurance carrier. Commissions are built into the policy and will not change the premium rate you are quoted. In other words, there is no surcharge and commissions are not paid directly by the client. Because commissions are built into the policy and cannot be altered, neither they nor the premium rates are negotiable. The best way to get the lowest premiums is to shop around and get quotes from multiple insurance carriers.

Amounts of commission vary by insurance carrier, but agents generally receive up to 55% of your first-year premium for permanent cash value life insurance policies. After that, agents usually receive 3% to 5% in renewal commissions for the next five to ten years. Commissions for term insurance are typically around 35% of the first-year premium and are not renewable in the following years.

Agents also get paid sales bonuses for reaching high production goals set by insurance carriers. Production incentives like exotic trips and luxurious gifts are also awarded. It is safe to assume that your premiums indirectly reflect the cost of these bonuses in addition to the cost of the agents’ commissions.

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