Ever wonder how much a life insurance agent can make over a policy? Have you wondered if an insurance agent receives a salary? This can be recognized if you read some tips on selling insurance to clients.
This is a dirty tactic from insurance companies who refuse to let you know about how much agents receive; otherwise it will kill the sale.
If the public knew how much a general agent can get on the first-year premium, many will become aware of it. This information was claimed by one life agent who refused to identify her name.
The commission is discussed between the life insurance company and her general agent that underwrites the policies she sells. It is inevitably based on a percentage of the first-year premium. Should a customer cancel the policy during the first year, the agent needs to return the money or commission back to the insurer. So these agents make no salaries but commissions.
She says that most of the life insurance companies she has worked provide the whole first-year premium and more sales commission. This may seem considerable, but it is smaller in amounts as compared to what the insurer anticipates to get in premiums in the coming years to come. You can also know about this when you see few tips on selling insurance effectively.
Best Bang for Your Buck
The compensation accepted by an agent is by far beyond the first year. There can be renewal commissions that can get as high as 7.5% of the premium for the next nine years. After the first ten years, agents will receive a smaller amount. This information was mentioned by James Hunt of the Consumer Federation of America.
According to Hunt, for whatever policy type, an agent earns the same percentage of the base amount of the policy. That’s probably why agents focus more on dealing with cash-value policies, which usually run longer. If they are investment vehicles, it involves bigger dollar amounts, rather than term policies, where the dollar amounts are smaller in fees.
A question may arise on why a life insurance agent cannot minimize the commission directly. Two reasons: it’s actually the insurance company who makes the reduction, and the discussed commission is a small invariable percentage. This is featured in some tips on selling insurance to the public.