While the insurance agent space is highly competitive and continuously growing, it holds unlimited opportunity to earn while also being able to help others along the way. With over 927,000 active US agents and brokers, there’s a reason why people continue to choose this profession. From earning potential to flexibility and residual income, we’re here to answer the question: How do insurance agents make money?
If you’re thinking about a career change, are new to the industry, or are an experienced agent, understanding the diverse earning structures of the profession is key to long-term growth and success.
Keeping this all in mind, we’ll explore a number of different earning methods, the difference between independent agents, captive agents, and owners, as well as additional earning opportunities.
Let’s dive in!
Commission-Based Compensation
Commission-based pay is an earning structure where individuals are incentivized to earn more income by increasing the number of sales they bring in and/or close. Generally speaking, businesses will give their sales team a commission structure based on their organizations turnover, sales and profit. Agents will also usually have quotas or in other words, a fixed number of sales that they must make in order to stay on pace for the year.
Commission structures outline a particular percentage of each sale that the salesperson will keep when they close a sale. For example, if an insurance agent earns 10% commission for each sale they make, and they just made a $1000 sale, they will pocket $100. This is what we refer to as commission.
Types of Commissions
While commission structure may vary depending on the product that the agent sells, in general, there are two types of commission—initial commissions and renewal commissions.
Initial Commission:
Every time an insurance agent sells a new policy, they earn an initial commission. For insurance agents who earn a living solely from commission, initial commission stands as the bulk of the
money they make. The commission percentage that agents earn per sale varies greatly. This depends on the product(s) they offer, and the state of the business they work for. It’s also important to note that commission for insurance agents is generally based on the cost of a policy’s yearly premium. For example:
- Individual health insurance agents often earn between 5-10% commission on the first year premium of a policy.
- Group health policies usually earn a bit less, around 3-6%.
- Life insurance agents usually earn between 40-120% of the first year’s premiums.
- Home and Auto insurance agents earn roughly 5-10% of the first year’s premium.
Renewal Commissions:
Insurance agents also have the unique opportunity to earn an additional commission percentage when a client renews their policy. This is called a renewal commission. These payouts tend to be quite a bit lower than initial commissions, but still account for a significant portion of insurance agent’s yearly earnings. For example:
- Health insurance agents often earn 2-5% of the annual premium after year one.
- Group health agents earn about 2-8% for each renewal.
- Life insurance agents usually earn between 1-5% per renewal (some life insurance agents stop earning renewal commissions after the third year of a policy).
- Home and Auto agents earn around 2-5% for each year’s renewals.
Salary-Based Compensation
While commissions continue to stand as the most prevalent way that insurance agents make money, certain agents make the majority of their income by receiving a salary. This type of compensation is more common among agents who are new to the field as well as captive agents (those who work for a specific insurance company like Progressive or State Farm).
Facts About Salaried Agents
- Some of these agents still earn commissions and have sales quotas to meet in addition to their salary.
- Earning a base salary tends to be an attractive selling point for agents who are new to the profession, and prefer to have a predictable income. On the other hand, positions that favor salary-based compensation, tend to offer less earning opportunities when it comes to commissions.
- Oftentimes these positions offer bonuses and performance based incentives which serve as an additional income.
Hybrid Payment Structures
As previously touched on, many insurance agents profit from a hybrid compensation structure which combines a base salary with commission-based earnings. This payment model provides the security of a fixed income while also offering the potential to earn more money through performance. Hybrid structures are frequently utilized to recruit high-performing agents who prefer both financial security and the opportunity for higher earnings. The method strikes an ideal balance between stability and motivation to excel in sales.
Additional Income Opportunities
Cross-Selling and Upselling
Agents who offer multiple different types of insurance have the opportunity to increase their earnings by cross-selling. For example, an agent who offers homeowner insurance could also sell a client auto insurance as a bundled package. Since the overall cost of two policies is greater than that of one, the agent will in turn earn more commission.
Similarly, agents have the opportunity to upsell products to earn additional income. This involves selling the consumer add-ons or more of a comprehensive policy. Doing so enhances the protection that the client will receive while also increasing the agent’s commission.
Referral Programs 
Many insurance organizations provide bonuses or incentives to agents who attract new clients or refer other agents to the company. Building excellent client connections can lead to referrals, resulting in a consistent flow of new business.
Partnerships
To get access to quality leads, independent agents in particular can invest in partnerships with lead generation services like Benepath.
In addition to a flow of consistent and high-quality leads, these partners offer strategic marketing strategies like running paid advertising, or social media campaigns. Agents can increase their productivity and income over time with the aid of these partnerships.
Types of Insurance Agents and How They Make Money
A key factor that oftentimes determines how an insurance agent gets paid comes down to the type of agent they are. And don’t get confused, we’re not talking about the types of product they sell. Instead, we’re referring to the structure of the company they work for our own.
Independent Agents
What Are They: Independent insurance agents tend to work for themselves and sell insurance polices provided by multiple different insurance carriers. Think of these agents as the middleman between insurance consumers and the companies that sell insurance policies (the carriers).
Typical Payment Structure: Independent agents earn their income primarily through commissions based on the sales that they close. Since these agents sell policies from insurance carriers, they must negotiate contracts with each carrier to determine the commission payout they will receive.
Captive Agents
What Are They: Captive insurance agents only sell the plans offered by the one insurance company that they work for. They serve as the carrier’s agents and are usually more hands-on when it comes to the business’s operations and advertising efforts. These positions are often sought out and highly valuable to agents who are new to the field since their employers usually offer a wealth of resources and training.
Typical Payment Structure: Payment for captive agents usually includes both salary and commissions. The most typical setups offer agents a base income, while also providing a set commission rate on the policies they sell. Since these agents have the additional support of the company they work for, their commission rates tend to be lower than those of independent agents.
Agency Owners
What Are They: Agency owners are entrepreneurs who run their own insurance companies. They can be independent, offering insurance from numerous carriers, or franchised under a single carrier’s brand. Agency owners supervise the whole operation of their company, which includes recruiting and training agents, maintaining client relationships, and developing marketing and sales strategies.
Typical Payment Structure: Insurance agency owners generally make money in three different ways: personal sales, overrides (a percentage of the commissions earned by their agents), and agency profits. While agency owners have the potential to earn a high amount of money, they are responsible for running the entire business. This includes covering operational expenses, employee salaries, hiring processes, administrative work, marketing strategies and much more.
Final Thoughts
There are multiple pathways to earn money as an insurance agent. Whether it’s purely commission, salary, or a combination of the two, there’s an earning structure that aligns with every agent’s goals. The consumer need for insurance and the flexibility of the career path is why the industry is growing by thousands each year. And with opportunities such as cross-selling, referrals, and partnerships, agents are able to earn additional income on top of their expected compensation.
To learn more about life as an insurance agent, and gather a plethora of useful sales tips, check out our full resource library that houses tons of informational articles to make you more successful in your career.
If you’re ready to take your career to the next level with the help of Benepath’s insurance lead services, just fill out a form on the righthand side, or call us directly at (888)-684-3121 to get started!
