How Do the Insurance Agents Usually Get Paid?

Insurance agents usually receive a commission upon the underwriting approval of an annuity or insurance sale. Yet, this is not the only way that an agent can be paid. Some insurance companies employ their insurance agents as salaried employees. In other cases, an insurance agent may charge a fee for his or her insurance advice.

At the beginning of any insurance sale or consultation, an insurance agent ought to explain how he or she gets paid. Many insurance agents receive a commission form of compensation. In this instance, the agent gets paid when you decide to purchase an insurance product. Under this payment structure, the insurance agent needs to consistently write new business to receive first year commissions — the agent’s compensation in the first year of the policy. Generally, the agent’s insurance commission is higher in the first year of the policy’s existence than in subsequent years when an agent may receive a renewal or persistency fee for an insurance policy still on the books.

Some insurance companies do not pay their agents commissions for insurance sales. Instead, these agents receive a regular salary. However, most insurance agents that receive a salary compensation are still required to reach quarterly, bi-annual, or annual sales goals. When an agent reaches a certain sales plateau, he or she may be eligible for a bonus paid for by their insurance company. In order to keep top sales producers, some of these insurers pay agent renewals or persistency fees in the second year of the insurance policy and beyond or as long as the policy allows.

Other insurance agents work strictly as consultants. These individuals are not interested in recommending a certain insurance company’s policy or selling you a policy to receive a commission. Their job is to provide a comprehensive risk management plan. This could include every aspect of your household and business affairs including the protection of your personal effects, health, life, and finances. These agents receive a fee-based compensation for their consultation.

Insurance agents can be compensated in a number of ways. A commission based insurance agent receives compensation for new insurance sales and renewals (the second year commission of the policy and beyond). On the other hand, some insurance agents receive a salary from their employer. These agents might receive a company bonus for reaching or exceeding certain sales quotas. Lastly, other insurance agents do not receive compensation for the sale of insurance products. These insurance consultants charge a fee for their independent advice because they are not promoting any insurance carrier.

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