If you look at advertisements for insurance agents and producers, you may become obsessed with the word commission. When your income is tied to how much you sell, answering a question as simple as “how much do insurance agents make?” it can be more complicated than job boards might tell you. some might even find it daunting to explain it. For those who are confused or intimidated by the commission, we break it down below.
How do insurance commission rates and commission structures work?
Insurance commission rates vary by company and policy. Here’s a model of how the commission works: Let’s say one of your clients offers a form of coverage that you offer to your employees, and 12 employees sign up. Using simple numbers as an example, let’s say the coverage costs each employee $5 per week, deducted from their weekly paycheck, so each employee pays $260 per year. for 12 employees, that’s a grand total of $3,120. Let’s say your commission rate on these policies is 30%, so you would receive $936 that year, just for those 12 people.
Because an insurance agent’s salary is commission-based, it’s really up to each agent to determine what their annual income goal is. Using the example numbers above at that level of sales activity every week for a year, the agent could generate over $48,000 in commissions in their first year. Aflac recruiters believe this is a reasonable goal that a first-year agent working full-time could achieve. those who want to earn more can increase their activity levels to reach their personal income goals.
Knowing that the first year can be daunting, some operators offer bonuses to new agents to supplement their income and incentivize performance. First-year AFLAC agents who hit all bonus benchmarks end up earning $13,700 in bonuses alone. But even first-year agents who don’t hit all the benchmarks have ample bonus potential. For example, if you open two new accounts totaling $15,000 in annualized premiums within your first eight weeks, you’ll earn a bonus of $1,200.1
aflac also offers a distinct advantage in that, unlike many other commission structures, agents are paid part of their commission as soon as coverage is issued. That means you don’t have to wait until the policyholder actually starts paying for coverage before you see money in their account.
Salary differences for licensed insurance agents based on average years of experience
Insurance agents don’t actually earn salaries, because they are independent business owners dealing with their own income. But the longer you’re an agent, the higher your earning potential, generally speaking: you’ll get better at your job, start getting referrals, and your existing clients can grow. Just like with your first year, how much you sell determines how much you earn. so if you want to slow down to focus on other parts of your life, you can, and if you want to go full throttle, you can too.
But if you work with a company that pays renewal fees, the amount an insurance agent can earn per policy may be a little better. In short, renewal fees pay you for work that’s essentially already done, as long as that work is still up for grabs.
when explaining renewal fees to new agents, reese golchin, a market recruiter for aflac in north carolina, uses an example we’re all familiar with: beyoncé’s “single ladies,” who have earned more than $10 million to date. the date.2,3
The songwriters behind “single ladies” made money when the song first came out, for sure. but every time “single ladies” is used in a movie, broadcast by fans, or played at an event, the songwriters earn royalties, a payment based on the work they did the heavy lifting years ago, because that work is still in use . they haven’t written a new song, and they may not be in the songwriting business anymore. but royalty checks will continue to come in as long as that song is in use.
golchin’s lesson? “You have to think about insurance policies the same way you think about pop songs.” If you work with an operator that uses renewal fees, like Aflac, you earn “royalties” – payment for work you’ve already done the heavy lifting on.
Let’s go back to the 12 employees who bought your coverage. When those 12 employees renew their policies the following year, you receive a renewal fee, without having to sell the policy again. If those 12 employees’ renewed policies earn you a commission of, say, 6% on that $3,120, that works out to a renewal commission of $187. you get that $187 even though the hard work of the initial sale is already done. The best agents will maintain relationships with clients and policyholders year-round to ensure they’re happy with their coverage, in part because when an employee lets their policy lapse, that policy stops earning a renewal fee. It’s also an opportunity to meet with new hires who might buy a policy, increasing the agent’s commission. In this business, helping people pays.
See also: What Is a Health Insurance Premium?
once you’ve been an aflac agent for two years, you’ll be entitled to 50% of your renewal fees, which means you could leave aflac and still receive 50% of your renewal fees. after five years of service, that acquired percentage increases to 75%; after 10, you are 100% vested. That means that even if you leave AFLAC after two years, as long as those 12 employees keep their policies, you get back $93 a year from the work you did two years ago (50% of the original $187). if you leave after five years? jumps to $140 if policies remain in force. and after 10 years, that renewal is yours in its entirety as long as the policies remain in force.
Another route some agents take: work with insurance brokers. When you partner with brokers, the commission to you may not be as high as when you work independently because there may be additional parties that take a percentage of sales. But the trade-off is that the brokers have done some of the legwork by cultivating the relationships with the clients they introduce to you. they often work with larger companies and can include you in their business network, which saves you from having to do the prospecting work with those companies. so even if your commission per policy is lower, if you’re selling 300 policies at once instead of 30, the increase in volume may be worth it.
The truth about insurance agent commission rates
“people can be intimidated when they hear ‘commission,’” says meaghan mutrie, a new england-based market recruiter for aflac. “But compensation depends on the time and work you put in. It’s an opportunity to adjust your income goals to your needs – you can set what that looks like.”4
The great thing about a traditional salaried position is that even if you have a week off, or a bad year, your paycheck stays the same. But the downside of a salaried position is that you could be outperforming your peers, doing the best job of your life…and your paycheck stays the same. You are also at the mercy of your employer as to how long you stay on board; layoffs and reductions in hours are out of his control.
On the contrary, an insurance producer’s income is determined by his own drive, his own ambition, his own desire to win. and their own lifestyle: Agents can work part-time while focusing on other areas of life.
The truth about insurance agent commission income boils down to this: It’s what you want it to be, not what a company decides is right for you. that can be stressful at first, but quickly, it feels more like freedom.