How Much Do Insurance Agents Make per Policy?

Written by Matthew King, time it takes to read this article is  minute(s).


Are you interested in entering the world of insurance sales? This can be a highly rewarding and enjoyable field — as well as a profitable one.

As with any career, it’s important to understand your earning potential before you take the next steps forward. As you begin to do your research, you might have questions such as, “How do insurance commissions work? and “How much do insurance agents make per policy?”

Today, we’re crunching the numbers and sharing the information you need to know.

What Are Insurance Commissions?

Before we dive into this topic, it’s important to understand that specific commission structures will vary by policy, company, and even location. There isn’t a universal figure that applies to everyone in this position.

While this is the case, there are some standards that we can go by. In this industry, most life insurance agents earn commissions that equal between 60% and 80% of the premiums you pay in the first year of your policy. As you continue to pay into your policy year after year, they will continue to receive a commission, but it won’t be as high.

Considered over the course of your policy’s lifetime, these yearly commissions average out to be around 5% to 10% of the premiums you pay. In 2021, life insurance companies in the United States paid a collective $51 billion in commissions to agents around the nation. These costs equaled 5% of their total expenditures.

How Much Do Insurance Agents Make Per Policy? Factors to Consider

The idea of earning insurance commission is attractive, but it’s important to be realistic. Everyone’s pay scale will be different, and there are a few different factors that can help you estimate what your licensed insurance agent’s salary might be. Let’s take a look at these factors in greater detail

Type of Agent

There are two main types of insurance agents:

  • Captive agents
  • Independent brokers

Let’s take a closer look.

Captive Agents

Captive agents are those who sell life insurance policies from one company only. As their name implies, they’re held “captive” by that company and cannot advertise policies from any other provider to their clients.

In many cases, captive agents will receive lower commission rates than brokers. This is because the company they work for will usually offer them a full benefits package that includes perks like:

  • Retirement accounts
  • Health and dental insurance
  • Paid time off

Though their commissions might not be as high, many agents prefer to go this route because the benefits can be valuable and necessary. Plus, they have the advantage of mentorship, training, and administrative support on-demand. They may also be able to leverage their company’s marketing team to get the word out about their skills and expertise.

As a captive agent, you may also have the opportunity to earn additional commission based on your sales performance or your ability to meet certain goals. These goals might include:

  • Growing your book
  • Retaining new customers
  • Finding new leads
  • Selling a certain number of annual premiums

The main disadvantages of working as a captive agent include the paperwork and contracts you’ll need to complete. You may also feel limited if you’re required to sell certain insurance products to clients, even if they might not be the best options for their needs.

Independent Brokers

Independent brokers are those who don’t work specifically for any specific company. Rather, they enter into contracts with multiple insurance providers, so they can “shop” the available policies and offer their clients a wider range of options.

As brokers advertise and sell insurance policies from a variety of different companies, they can work with their clients to determine the best plans for their needs.

Brokers can usually earn commissions up to 50% higher than captive agents, but their commission schedule will depend on a few factors, such as:

  • Their contract terms with each insurance company
  • The type of insurance or policy they sell

One of the best parts about being an independent insurance agent is that you aren’t pigeonholed into one company’s policies. You can do your research, look into multiple options, and cater to your client’s requirements. This allows you to build stronger, more trustworthy bonds with your community, which can grow your books and build your bottom line.

The drawback is that you’ll usually be responsible for covering your own benefits, including insurance and retirement. You’ll also be required to cover your own bills, taxes, payroll, and other business expenses. If you want to become an independent insurance agent, remember to keep this structure in mind.

Direct Appointments vs. Clusters

if you work under a direct appointment with an insurance carrier, this means that you will earn 100% of the commission that the carrier pays you. The other option is to partner with a cluster.

A cluster is a group of individuals that have joined together to create a professional network, sharing benefits and support. In this case, these individuals can include:

  • Insurance agents
  • Insurance brokers
  • Insurance agencies

If you choose to partner with a cluster, make sure you clearly understand how the commission rates will work and how the earnings will be split before you begin. While it might be surprising to learn that you won’t make 100% of the commission you worked so hard for, this setup can be beneficial when business is slow.

When you work in a cluster, you can still earn a commission even if your own work has hit a plateau. These arrangements usually enable profit sharing without a minimum volume to meet, which helps balance out the pace of business and keeps your income relatively steady.

Geographic Location

In many industries, the place you live can directly influence how much money you make. Insurance sales are no different. There are certain states in the U.S. where agents tend to make more than their peers, despite both parties having the same level of training, experience, and education.

This map shows you a visual breakdown of where those hotspots lie. According to the guide, insurance agents in the following five states are poised to make the most money in commissions:

  • Massachusetts
  • Rhode Island
  • New York
  • New Jersey
  • California

What makes these states more profitable than others? While there’s no clear-cut answer, experts explain that agents in these states have access to a greater number of industry-related resources, including:

  • Outpatient care centers
  • Securities and commodities firms

In addition, the policies in these locations may be higher due to a range of factors. Certain issues that can drive the price of a premium up or down include:

  • The cost of living
  • Accident rates
  • Crime rates
  • Public health status

Though you may be tempted to move to an area where your earning potential could be higher, keep the level of industry saturation in mind. A bustling city with a large population may be filled with opportunities to connect with customers, but there’s another side to that coin.

While you may encounter more opportunities, remember that there are also more people just like you, already working in the region. When there’s a higher concentration of agents, the market is more competitive and could be harder to enter.

Checking Your Location

At this point, you might be wondering how much insurance agents make in the state where you currently live or are planning to relocate to. For instance, how much do insurance agents make in Texas?

To find this answer, you can go straight to the most authoritative resource: The Bureau of Labor Statistics (BLS). According to the BLS, instance agents in Texas currently make around $30.11 per hour or $62,630 per year. The BLS has salary information on almost every industry and occupation in the country, including a breakdown of salary expectations by region.

The Type of Policy You Sell

The sales commission you earn on each policy will also depend on the type of life insurance you sell. The main options include:

  • Whole life insurance
  • Flexible premium/universal life insurance
  • Term life insurance

Let’s take a closer look at the differences.

Whole Life Insurance

Throughout the industry, whole-life premiums tend to have the best-paying commissions. In some cases, they can be more than 100% of the amount of the client’s first-year premium, though this can change due to certain factors, including the age of the insured.

This means that if you sell a policy with a first-year premium of $3,400, then you may be able to earn at least that much as a first-year commission. Yet, the plans aren’t always this simple and straightforward.

Clients can choose to add riders to their life insurance policies, and these riders do pay low commissions. The two main kinds include:

  • Cash-value riders
  • Term insurance riders

A cash-value rider enhances a policy’s cash value in its first few years. The commission on this rider is usually much lower than the commission on the base policy. On the other hand, a term insurance rider allows clients to add coverage to their policy at a very low cost.

Again, those commissions are low, especially compared to what you’ll earn from the whole-life policy.

Flexible-Premium/Universal Life Insurance

With a universal life insurance policy, any premiums that a client pays in the first year (up to the amount of the pre-determined target premium) will usually carry a commission rate of at least 100%.

While agents will receive a commission for any subsequent premiums paid above the target level in the first year, they will not be as high.

Why do whole life and universal life insurance policies lead to the highest commissions? Put simply, these policies usually offer lifelong coverage. In addition, they have a cash value feature that earns interest over time.

As such, they usually come with higher premiums than term life insurance policies. This naturally makes them more attractive to agents, because they know they can earn more with them!

Yet, before you jump right into this niche, remember that cash-value life insurance policies require a far greater deal of client interaction and nurturing. You may need to keep a close eye on the investments, monitoring and making updates as required.

Term Life Insurance

Most insurance companies pay sales agents a commission that’s calculated as a percentage of the premium that each client pays per year. Although exceptions do exist, these commission rates are usually lower than the ones you could earn with a whole life or universal life policy.

Agent Qualifications

When you’re ready to learn how to become an independent life insurance agent, one of the first things to do is understand the requirements you’ll need to meet in your state.

In addition to your education, you’ll also need formal training before you can begin work. While some insurance agents have college degrees, others are able to rise in the ranks with a high school diploma. The more time you spend in this space, the more emphasis you’ll see on training, skills, and thought leadership.

As you amass these credentials, your earning power should steadily rise. Most of the time, your training will be in the form of mentorship as you learn the ropes by watching other agents or through phone support. It helps to shadow others as they work, learning all about the position and what it requires.

Before you can start selling policies as a captive agent or independent broker, you’ll also need to be licensed to work in the state that you’re practicing in. Depending on your location, you may need to get a different license for each type of insurance that you sell. You’ll obtain this license by taking and passing a state exam that focuses on insurance laws, regulations, ethics, and more.

Learn More About Insurance Agent Commissions

There isn’t a one-size-fits-all answer to the question, “How much do insurance agents make per policy?” The answer can vary depending on where you live, the company you work for, the type of insurance you sell, and a host of other factors.

As you prepare to enter the insurance realm, it’s important to stay up-to-date. At Insurance Sales 101, you’ll find all of the tips, trends, techniques, and insights to keep informed. Become a member today to receive exclusive access to even more resources and savings!

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