Life Insurance Agents

How Do Life Insurance Agents Make Money?

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Life insurance agents help individuals, families, and businesses purchase life insurance policies to provide financial protection in the event of death. But how exactly do life insurance agents make money themselves? Here is an in-depth look at the various ways life insurance agents get paid.

Commissions on New Policies

The primary way life insurance agents earn an income is through commissions on new life insurance policies they sell. The commission is a percentage of the total first year premium amount on the policy. Commission rates can vary significantly turn on:

The insurance company: Some companies pay higher commissions than others.

The type of policy:  Term life policies usually have lower commissions than permanent policies like whole life or universal life. Commissions on term life are often in the range of 20-100% of the first year premium. For permanent policies, commissions are commonly 100% or more of the first year premium.

Premium amount: Policies with higher annual premiums generally have higher commissions in dollar terms.

State regulations: Some states cap commission payouts on life insurance sales.

A typical commission may be 40-60% of the first year premium for a term life policy, and 80-120% for a whole life policy. For example, an agent selling a $500,000 term life policy with a $600 annual premium may earn a 60% commission or $360. An agent selling a $250,000 whole life policy with a $1,500 annual premium may get a 110% commission equalling $1,650.

So in simple terms, the more policies and the bigger the premiums, the more money an agent can make. Top producing agents often sell millions of dollars worth of new coverage each year.

Renewal Commissions  

In addition to commissions on new sales, agents often receive smaller renewal commissions in subsequent years that a sold policy remains in force. These trails commissions usually range from 2-5% of the renewal premium amount. So if a client continues paying on a policy year after year, the agent who originally sold the policy will continue receiving additional commission income from those ongoing renewals. This provides agents with an incentive to keep clients satisfied so policies remain active.

Other Performance Bonuses

Many insurance carriers also reward their top agents with bonuses for reaching certain sales goals or production levels. For example, an agent may receive a bonus for selling a target number of new policies or generating a specified dollar amount of new premiums over a calendar quarter or year. These production bonuses provide additional income on top of regular commissions.

Fee-Based Income

Some agents charge fees directly to clients instead of or in addition to collecting commissions from insurance carriers. These fees can be hourly rates or flat fixed fees for the agent’s services. This fee-based approach allows flexibility in how the agent is compensated. In some cases they may lower commissions and charge clients directly to even out earnings.

Income From Additional Services

Many agents offer additional services beyond just selling life insurance policies. These services, such as assistance with filing claims or managing policies, can provide additional revenue sources for the agent. Agents may also earn commissions on other products like annuities, long-term care insurance, or disability insurance. Offering a wide range of services allows agents to diversify their income streams.

Agency Overrides 

Agents who move into management roles at insurance agencies can also earn overrides on sales revenue generated by newer agents they recruit. These agency overrides provide yet another potential income source for experienced agents.

Making a Career Out of Life Insurance Sales

Selling life insurance can clearly be a lucrative career with numerous ways to earn substantial income. Top agents who build up a large client base and sell high volumes of coverage can comfortably earn six figure incomes after some years in the business. 

But reaching this level of success requires dedication, hard work, and patience in the early stages as an agent builds up their clientele. It may take months or years of prospecting, marketing, appointments, proposals, and followups before an agent generates enough commissions to rely on as a full time career. 

Becoming very knowledgeable about all types of life insurance products is also critical. This allows agents to properly assess clients’ needs and recommend suitable policies. Getting the proper state licensing and carrier appointments in place is essential too.

While unpredictable and commission-driven, a life insurance sales career offers the flexibility and monetary potential that many find appealing. It provides the satisfaction of helping families protect their financial futures while also building up your own assets. If you have the drive and determination, selling life insurance could be a rewarding path.


Q1. How do life insurance agents earn their income?

A1. Life insurance agents typically earn their income through commissions and sometimes bonuses from selling life insurance policies. These commissions are a percentage of the premium amount paid by the policyholder.

Q2. Are life insurance agents paid differently for different types of policies?

A2. Yes, life insurance agents may receive varying commissions based on the type of policy they sell. Policies with higher premiums or longer terms often result in higher commissions.

Q3. Do policyholders pay extra fees for using the services of a life insurance agent?

A3. No, policyholders do not pay extra fees for using an agent’s services. The agent’s commission is typically covered by the insurance company, and it does not increase the policyholder’s premium.

Q4. Can life insurance agents recommend specific policies from different companies?

A4. Yes, life insurance agents can provide recommendations for policies from different insurance companies. They can help you find a policy that dress your needs and budget.

Q5. Is it possible to negotiate the commission rate with a life insurance agent?

A5. In some cases, you may be able to negotiate the commission rate with a life insurance agent, but it’s essential to understand that these rates are often set by the insurance company. Negotiations may be limited.

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