How much do insurance agents make?

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Insurance agents can earn a solid living, but it’s a career that rewards hard work and hustle. While captive agents typically earn a salary if working for a carrier, independent agents usually work solely on commission, meaning they only make money when they sell a policy. 

Because of this, annual income can vary widely, with the lowest-earning agents making around $37,000 and the highest over $135,000. 

Factors like experience, the type of insurance sold, and where an agent works can all impact income. Agents who specialize in complex products like life or commercial insurance often earn more, as do those working in high-demand markets. And with continued demand for insurance products, especially in health and senior markets, job prospects remain strong.

How do insurance agents make money?

Insurance agents help people purchase insurance policies. Many agents specialize in a specific product type, such as life insurance, health insurance, or home insurance, but others may be able to sell multiple kinds of coverage.

Insurance agents may be captive or independent. Captive agents can only sell one insurer’s policies, but independent agents can sell policies from multiple insurance companies. 

While independent agents work on commission alone — they only make money when they sell a policy — agents employed by a single insurer or an agency may earn a salary, commission, or both.

What is a captive agent?

An insurance agent who works exclusively with one insurer or agency is called a captive agent. Captive agents often earn a salary in addition to the commissions on each policy they sell, and they can benefit from the name recognition that comes from working for a well-known company.

How much do captive agents make?

Captive agents can earn income in several ways. Many are paid a salary by the parent company they work for, but they may also earn a commission. Some insurers and agencies even pay a bonus if you meet specific goals.

The commission structure can pay out multiple times: first, when the initial policy is sold, and again each time the policy is renewed. (Or, in the case of life insurance, when a term policy is converted into a permanent or whole life policy.)

However, there is a significant difference in earnings for captive insurance agents depending on the carrier they work for.

According to the Bureau of Labor Statistics (BLS), the highest-paid agents work for health insurance companies, with median annual salaries of $74,060. Agents who work for all other insurance companies, except life insurance, earn a median salary of around $60,840.

Note that the BLS’s wage data doesn’t include earnings from commissions. This is important to keep in mind, as captive agents typically earn lower commissions than independent agents, if they earn commissions at all. 

Typical captive agent commission rates are 5% to 10% of the first year’s premium for home and auto insurance. However, commission rates can range between 40% and 100% of the first year’s premium for life insurance, depending on the type of life insurance policy. 

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What is an independent agent?

An independent agent is licensed to sell insurance policies without being employed by a specific carrier. 

“I work for the client, not the company. I can shop around from dozens of insurance providers to find the best deal and the right fit,” says Alex Schlesinger, founder and CEO of Active Mutual and an independent agent.

One agent may offer multiple types of coverage, including home, auto, and life insurance, and they can work with you to find premiums from several companies at once to find the policy that best fits your needs.

“If one company turns you down or charges too much, I’ve got five others ready to go,” Schlesinger says. “That flexibility can be the difference between someone getting covered or going unprotected.”

How do independent insurance agents get paid?

Independent insurance agents are paid on commission. That means that when they sell a policy, the insurance carrier offering the policy pays the agent a percentage of the premiums.

Commissions are usually calculated based on either the first-year premiums or the annual premiums (if the policy is renewed). This distinction is important because certain types of policies that aren’t typically renewed, like life insurance, can pay over 100% of the first-year premiums in commissions.

Term life insurance commissions are between 30% and 70% of the first year’s premiums, while whole life insurance, which is meant to last as long as you live, may pay as much as 120% in commissions. The difference is that term life insurance has lower premiums than whole life insurance and only lasts for a defined term.

How much do insurance agents make on renewals?

Insurance sales agents who earn a commission for the first year of premiums may continue earning commissions whenever a policy is renewed. These subsequent earnings are typically at lower rates, however.

For property and casualty insurance — home and auto — an insurance agent will usually earn around 2% to 5% in commissions.

While life insurance doesn’t get renewed, per se, term life policies may sometimes be able to be converted into whole life policies when the term ends. The insurance agent will typically earn a commission of about 50% to 90% for the first year of premiums, followed by 2% to 5% of premiums for each subsequent year that the insured keeps the policy.

How much do insurance brokers make?

An insurance broker works on behalf of the customer, helping them find and select policies that fit their needs. Brokers can’t sell the policy themselves, so they’ll still need to work with an agent or carrier to ensure the customer receives coverage.

According to the most recent data from the BLS, insurance brokers make about $59,580 per year.

Like agents, insurance brokers work on commission, and they may earn commissions from the first year’s worth of premiums as well as for subsequent renewals. The percentage brokers can earn varies between types of insurance policies and each carrier’s rules, with higher percentages being offered for life insurance policies and lower percentages for home and auto policies.

Insurance agent commission rates

How much an insurance agent earns depends on the type of insurance policy, the company they work with, and how the commission structure is set up. Captive agents often earn a salary plus commission, while independent agents typically work on commission alone.

On average:

• Captive home and auto insurance agents typically earn a 5% to 10% commission on the first year’s premium.
• Independent agents generally earn higher commissions, averaging around 15% on new home and auto policies.
• Life insurance agents earn most of their income from first-year commissions. Term life policies usually pay between 30% and 70% of the first-year premium, while whole life insurance can pay up to 120%.

Agents may also earn renewal commissions. For property and casualty insurance, renewal commissions typically range from 2% to 5%. For life insurance, ongoing commissions after the first year are usually in the 2% to 5% range.

How to become an insurance agent

Get your degree

Most agents start with a high school diploma, but a college degree can make you more competitive. Once hired, new agents may receive on-the-job training, often by shadowing experienced professionals. This helps them learn about insurance products, sales techniques, and client interactions.

Get licensed

All agents must be licensed in the states where they sell insurance, which requires them to take state-sponsored courses and pass an exam. They must also be licensed for the specific type of insurance they want to sell. 

In order to keep their license up to date, insurance sales agents may be required to take refresher courses periodically. Each state has different laws around license renewals, so check with your state’s department of insurance.

Agents who also want to sell financial products must pass additional exams from the Financial Industry Regulatory Authority (FINRA), such as the Series 6 for mutual funds and annuities, or the Series 7 for broader securities sales.

Get employed

Once you’re licensed in your state, you’ll need to find a job. Most independent agents still work for an agency, so finding an agency if you want to be independent is your next step. Otherwise, if you want to work for an insurance company, you’ll need to start applying to the ones you’re interested in.

It’s also possible to start working for an agency or insurance carrier without being licensed first. In that case, the business may pay for you to get licensed. However, you may need to take an entry-level job at one of these companies and work your way up.

Build your client base

Clients who trust you will come to you first if they need more coverage. That can translate into more sales, but it also means building relationships that could last literally a lifetime.

“I stay in touch with my clients over the years, checking in to answer questions or update their coverage if their life changes, like with a new baby or a marriage,” said Active Mutual’s Schlesinger. “Ultimately, my goal is to build long-term relationships. It’s a job where many of my clients end up like friends or family, and that’s a responsibility I take very seriously.”

Is a career as an insurance agent worth it?

Working as an insurance sales agent can be a rewarding and well-compensated career. Compared to the median wage of all occupations, insurance sales agent wages are about $10,000 to $15,000 higher. But because of the commission structure, insurance agents can reward themselves for hard work, making it ideal for people who want to set their own hours while earning as much as they can.

Zack Sigel

 

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Zack Sigel is a writer and editor based in New York City. He has been managing editor at Policygenius and M1 Finance, where he led teams specialized in writing about business and finance, and he has also written about music and culture for Hyperallergic, VH1, Complex, and the Los Angeles Review of Books. Zack has a bachelor's degree from New York University, Tisch School of the Arts.