How much do insurance agents and brokers earn monthly or yearly? How do insurance agents & brokers make money? Here are 5 clever ways insurance agents make money. If you have purchased an insurance policy in the past, chances are that you made that purchase through an insurance agent or broker. Agents and brokers act as intermediaries between you, the insurance buyer, and the insurance company.
5 Clever Ways Insurance Agents and Brokers Make Money
Having understood how insurance agents differ from brokers and the roles played by each, let’s look at how they make their bucks. Insurance agents and brokers are not restricted to only one method of making profit. Here are some of the ways they make money:
Earning commissions from each insurance policy sale is the most common way for insurance agents to make money. These commissions from policy sales is usually a specified percentage of the sale. The more policies the agent sells, the more money they make. Agents earn commissions on both new and renewal policies. Commission rates vary depending on the type of policy (life insurance, health insurance, etc) and on whether it’s a new or renewal policy.
Most insurance agents that are committed to one insurance company (captive agents) are paid by a regular, monthly salary. While some agents are paid only by salary regardless of their performance, others are paid both a salary and a performance-based commission.
Both insurance agents and brokers help clients with financial planning. Some clients may need professional advice regarding what type of policy to go for and are ready to pay agents or brokers who can help them make well-informed decisions. In addition to their commissions or services charges, agents and brokers also make money with the fees they charge for this service.
4. Service charges
Since brokers are not affiliated with insurance companies, their profits come from insurance buyers. They charge specified rates for the professional services they render for insurance buyers. These charges vary depending on the type of policy and the complexity of the tasks involved in purchasing the policy.
5. Multiple services
Many insurance agents double as insurance brokers and vice versa. This is a smart move to help them make as much as possible profits from both aspects of the insurance intermediary business.
How Much Do Insurance Agents and Brokers Earn Monthly or Annually?
The average annual salary and wages of an insurance agent or broker is around $50,000. Few of them tend to earn more than $100,000 a year. There is a very wide difference in the take-home pay of experienced insurance agents and brokers and new ones because experienced ones tend to sell more policies and earn more commissions.
Many people erroneously think insurance agents and brokers are the same. And most of those who know they are different cannot tell exactly what the difference between them is.
What’s the Difference Between an Insurance Agent and a Broker?
Generally, an agent works as a representative for one or more insurance companies, while a broker represents the insurance buyer. An insurance agent or agency cannot sell insurance policies on behalf of an insurance company unless with the company’s authorization.
Before an insurance company authorizes someone as an agent, there must be a contractual agreement that specifies what products the agent will sell on behalf of the company and what commissions the agent will earn for each policy sale made. However, the contract usually allows the agent to initiate a policy on behalf of the insurance company
An insurance agent can be either captive or independent. A captive agent works on behalf of just one insurance company, while an independent agent operates for multiple insurers. Insurance brokers are not appointed by an insurance company. What they do is submit insurance applications to insurance companies on behalf of their clients. Unlike agents, brokers cannot initiate insurance policies.
Before initiating a policy, a broker must first obtain a binder—a legal document regarded as a temporary insurance policy—from the insurance company. This document usually applies for a short period, such as one or two months, and must be signed by a representative of the insurance company. The binder is later replaced by a definitive policy.
There are two types of insurance brokers:
- Retail brokers
- Wholesale brokers
While retail brokers interact directly with policy holders, wholesale brokers handle specialized coverage packages that are not readily available to retail brokers and agents. So, if you purchased your policy through a broker, that broker is a retail broker.
Both insurance agents and brokers may be dispensable. Some insurance companies sell policies directly to customers without using agents or brokers as intermediaries. Such companies are called direct writers.