Usually, this includes a sizable upfront commission at the beginning of the policy and residual commissions if the policy is renewed. The percentages vary depending on the product.
If an agent sells a workers’ comp policy, for example, the agency receives a percentage of the total premium as a commission, often around 10 percent. The agency may take some of that amount to pay for extraneous costs, such as clerical workers, IT needs, or account managers.
They then allocate the rest to the agent who sold the policy. If the policy is renewed at the end of the term, the agent may get a residual payment, which is likely to be smaller.
Life insurance agents, meanwhile, tend to receive a larger initial commission from the first-year premium because life insurance is a long-term product. Meanwhile, property and casualty insurance agents receive a smaller percentage upfront, with a residual payment each time the policy renews.
Salary Plus Commission
Some insurance producers, especially those who work for larger agencies, earn a steady salary with a smaller commission when they make sales.
If the average commission rate for an insurance sales agent on commission is 10 to 20 percent of the premium cost, for example, salespeople with a salary plus commission might earn a base salary of $40,000 plus a 6 percent commission on sales.
Captive agents are more likely to be paid at least in part with a salary, while independent agents frequently work solely on commission.
The drawback? Even if you hustle and bring in big sales, earning significantly from those sales will be harder. A straight salary, or a salary plus commission, is thus a better bet for new agents who haven’t yet learned the strategies that allow more seasoned agents to earn a high sales commission.
Bonus Commission
A bonus commission is a fixed amount you earn whether you are salaried or working on commission. It’s set up by your insurance agency owner and is based on bringing in a certain level of new business over a period of time.
So, for example, if you sell $40,000 worth of annuities in a single quarter, you might earn a bonus commission of $1,000. This is in addition to your regular salary and/or commissions.
Straight Salary
According to the U.S. Bureau of Labor Statistics, insurance sales agents working on salary make a median pay of $49,840 a year, which works out to $23.96 per hour. This varies based on the type of insurance being sold, however.