How Much Do Life Insurance Agents Make?

by Steve Jones - April 8, 2024
A female insurance agent works on a laptop with a couple buying insurance.

If you are considering a career as an independent insurance agent, naturally you are wondering how much money you can expect to make with this occupation. Factors include the types of products you sell, how much your business increases from month to month, how easy it is for you to acquire new customers and whether you’re able to sell additional products to existing clients (also known as “cross-selling”). 

In this comprehensive guide, you’ll learn how much agents make based on statistical studies from major research organizations, as well as how you can maximize your potential earnings if you become an insurance agent

Role of a Life Insurance Agent 

As an independent life insurance agent, you function as a connector between clients who need financial protection in the event of their death and insurance companies who have the capital to honor such an obligation. Without agents like you, the industry would be much less efficient, since clients often may not have expertise in the ins and outs of financial services. 

Several insurance agent job skills, including industry expertise, communication skills, and strong networking abilities, will help to ensure your success. Additionally, you can choose to sell multiple types of insurance, including health, disability, long-term care products, and annuities, to maximize your income potential. 

Each of these products can complement each other for different types of clients, and a good agent knows how to mix and match these different services to achieve the best possible results. By selling a broader range of products and services, you can also cement the loyalty of your book of business, as you will have more opportunities for touchpoints throughout the lifetime of the relationship. 

What Factors Influence a Life Insurance Agent’s Salary? 

Several factors can influence your total compensation as an agent. One important aspect to keep in mind here is that base salary typically only comprises a portion of the total compensation package you can expect to earn each year. At the end of the day, you’re a salesperson, after all, and commissions factor heavily into those calculations. Another important question here is, how much do insurance agents make per policy? Again, the answer depends. 

Some of the most important factors that influence your compensation include: 

  • Commission Structure: Like most agents, you may be paid on a commission basis, earning a percentage of the premiums on the policies you sell. Your commission rate can vary significantly depending on the company, the type of policy (e.g., term vs. whole life), and other factors. Some policies offer higher commissions, especially in the first year after the sale. 
  • Renewal Commissions: In addition to initial commissions, you can often earn renewal commissions for as long as the policy remains in force. These are typically lower than the initial commission but can accumulate to form a significant portion of your income over time. 
  • Bonus and Incentives: Many companies offer bonuses and incentive programs if you meet or exceed certain sales targets. These can include cash bonuses, trips, and other rewards and can significantly boost your total earnings. 
  • Work Effort and Sales Skill: Your personal effort, sales skills, and ability to build relationships with clients greatly influences your success and, consequently, your earnings. If you are proactive, skilled communicators, and good at networking, you can maximize your performance. 
  • Agency Affiliation: Whether you work as an independent contractor, for a specific company, or through a brokerage can affect your earnings. If you go independent, you might have access to a wider range of products but will also need to cover your own business expenses. 
  • Economic Conditions: The broader economic environment can influence people’s ability to purchase life insurance, thereby affecting your earnings. During economic downturns, for example, individuals might prioritize other financial commitments over life insurance. 
  • Product Type: Different types of products have different commission structures. For example, whole-life policies usually offer higher commissions than term-life policies because they have higher premiums and are more complex financial products. You might also consider specializing in profitable niches
  • Continuing Education and Certifications: If you invest in your professional development by earning certifications (such as CLU and ChFC) or specializing in certain areas, you may be able to command higher commissions or attract more clients due to your specialized expertise. 
An insurance salesperson works with a senior couple on their insurance needs.

How Do Life Insurance Agents Get Paid? 

You will receive compensation from insurance companies through commissions. Often, you will receive a significant upfront commission for the first-year premium, as well as an ongoing “residual” that continues to pay out if the policy remains in effect. Annuities and similar products also typically feature similar compensation structures. Insurance agent pay depends heavily on these upfront and recurring commissions. 

This compensation structure may encourage you to focus on the sale of new policies and client renewals. As such, it benefits both the company that originates the policy and the clients since you receive an incentive to keep their business. You can, therefore, also act as an excellent client service representative and advisor to your clients. So, how do insurance agents get paid, really? You ultimately get paid by providing consistent, reliable value. 

The exact payment structure differs between policies and other products, such as annuities. For example, many carriers have begun eliminating renewal commissions on term-life products to discourage their sale. Whole-life policies, while more expensive typically for clients initially, also feature tax-advantaged savings components and a degree of permanence since the policy remains in effect until the death of the client. Hence, you may see greater commissions for this type of product when compared to term life. 

Highest Paying States for Life Insurance Agents 

According to the U.S. Bureau of Labor Statistics (BLS), the top-paying states for all types of agents, not just life insurance salespersons, were: 

State Annual Mean Wage 
New York $104,850 
New Jersey $100,590 
Massachusetts $94,830 
California $92,670 
Minnesota $90,490 

It’s no surprise that the top 5 states for agent earning potential include the states with the most affluent metropolitan areas in the country, including New York City, the San Francisco region, and Boston. If you’re an agent in these affluent regions, your salary may reach six figures! 

If you want to maximize your potential earnings, moving to a major metropolitan area can help give you access to a larger pool of potential clients who have the money to spend on products that can help protect their families and dependents in the event of their death. 

Commission Rates & Earning Potential 

According to PayScale, the average salary in 2024 for a life insurance agent came in at $51,374, with a range of $30,000 to $87,000 for base salary specifically. Bonuses range from $1,000 to $20,000, and commissions make up the difference, with ranges from $623 to $74,000. When factoring in all these variables, if you’re a typical agent, you can expect to bring home from $50,000 to $60,000. 

Commission rates depend on several components, including whether you are a captive or independent agent and the types of products sold. Commissions for term life insurance usually range from 30% to 80% of the annual premiums. 

Your exact earning potential ultimately depends on how effectively you establish strong connections with clients and sell them products that meet their needs while building in a sufficient margin. 

Whole and universal life policies offer significantly higher commissions than term life policies, so, to maximize your potential, you may look to emphasize these products with your book of business. 

Additionally, you can achieve greater earnings but with higher risk. If you’re an independent agent, you will need to actively look for and generate new business through lead generation, advertising, and face-to-face contact. If you’re a captive agent, you can rely on steadier leads and lower overhead but will typically have lower commissions. 

Achieve Your Highest Potential as an Insurance Agent 

If you’re an independent agent looking to expand your access to products that can benefit your clients, Bluefire Insurance offers a great platform. If you currently specialize in life insurance and related products, adding personal auto insurance products to your offerings can help increase client retention while adding diversified income streams. 

Ready to get started? We’re here to help! Whether you’re a new agent or an experienced, independent operator, Bluefire Insurance can help you build a reliable book of business. To learn more, call us at 866-424-9511, contact us to request more information or visit our knowledge center

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