How Do Insurance Sales Agents Get Paid?
Types of Commission In 2022
Last Updated: February 3, 2022
Do you want to know how do insurance sales agents get paid? Insurance agents work for insurance firms as representatives and might be captive or independent. So, a captive agent works on behalf of a single insurer whereas an independent agent represents a number of different insurance companies.
Likewise, while some captive agents are salaried, most are paid through commissions. Insurers pay commissions out of the premiums they charge policyholders. Similarly, base commissions, additional commissions, and contingent commissions are all possible options. Once you become insurance agent you sell health insurance, homeowner’s insurance, accident insurance, life insurance, and annuities.
Here, you earn a commission after selling insurance to people or corporations. As per Investopedia, depending on state restrictions, most commissions range between 2% and 8% of premiums. You also need to maintain an insurance agent dress code to impress clients.
How Do Insurance Sales Agents Get Paid?: Base Commission
Here, the “regular” income earning from insurance policies is known as base commission. It is calculated as a percentage of the premium and varies depending on the type of coverage. As per the balance, on general liability insurance, an insurance agent may receive a 15% commission and a 10% commission on workers compensation coverage. Similarly, if an insurance holder pays $2,000 for a liability policy, the agent will take $2,000 from them, keep $300 in commission, and give the remaining $1,700 to the insurance company.
Likewise, some insurers pay a greater base commission for new policies than for renewals in order to encourage agents to write new policies. For example, an insurer may pay a 10% commission on a new workers compensation policy but only a 9% charge on a renewal. Furthermore, you can ask agents from the agent directory about standard rates.
Ways Insurance Sales Agents Get Paid: Additional or Contingent Commission
Many insurers pay additional or contingent commissions in addition to base commissions. These reward agents who meet the insurer’s sales volume, profitability, growth, leads, and retention targets. Also, supplemental commissions are normally calculated as a proportion of the total premium. The percentage is determined at the start of the year and informed to the agent. Therefore, it shows the performance of the agent and independent insurance agency in the preceding calendar year.
Contingent commissions are usually determined on an annual basis. Elite Insurance, for example, has agreed to pay the Jones Agency a 2% contingent commission if the agency writes $10 million in new property insurance in 2020. Elite will wait until early 2021 to see if the Jones Agency has achieved its goal. Jones earns the commission if this is the case. Lastly, we are here if you want to learn more about how to become an independent insurance agent.