Jane Dotson
Life insurance agents can make money in several ways, but their income mostly comes from commissions. The average annual salary of life insurance agents ranges from $62,000 to $76,000, with the potential to earn well over six figures. The income potential depends on various factors, including location, experience, certifications, types of policies sold, and the number of policies sold. Life insurance agents can earn commissions ranging from 40% to 100% of the first-year premium and additional commissions for renewals. The career offers strong earning potential but requires constant hustling, networking, and the ability to handle rejection.
What You'll Learn
Life insurance agent salary
The salary of a life insurance agent depends on several factors, including location, experience, certifications, types of policies sold, number of policies sold, and method of operation. Life insurance agents are typically paid through commissions, with some earning base salaries as well.
The average annual salary for life insurance agents ranges from $62,000 to $76,000, while the Bureau of Labor Statistics (BLS) estimates the yearly average to be almost $77,000 for all types of insurance agents. However, life insurance agents can earn well over six figures annually, with some making $158,636 in New York. The highest-paying states for life insurance agents include Washington, the District of Columbia, and New York.
Life insurance agents typically receive front-loaded commissions ranging from 40% to 115% of the policy's first-year premiums, with renewals bringing in a much lower commission of around 1% to 2%. Commissions are dependent on the type of life insurance policies sold, with whole life insurance plans offering the highest commission rates, followed by universal life insurance and term life insurance plans.
Independent agents, who represent multiple insurance companies, earn only through commissions and are responsible for their business expenses. In contrast, captive agents, who work exclusively with one insurance carrier, may receive a base salary, commissions, and benefits, but their commission percentages are usually lower.
While the career of a life insurance agent offers flexibility, lucrative earnings, and career growth opportunities, it also comes with challenges such as high rejection rates, the constant need for prospecting, and a demanding work schedule.
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Commission-based earnings
Life insurance agents can be either captive or independent. Captive agents work exclusively for a single insurance company and are usually paid a salary plus commissions. Independent agents, on the other hand, represent multiple insurance companies and are paid only through commissions.
The majority of a life insurance agent's earnings come from commissions. For every policy sold, the agent earns a large upfront commission, which can range from 40% to 100% of the first-year premium. The rate is set by the insurance company, and each state has its own commission limits. After the first year, agents receive smaller additional commissions, usually under 5% of the annual premium, for each year the policy is renewed. These commissions depend on the policy type, the state the policy is being written in, and the insurance company.
The commission structure varies depending on the type of life insurance policy. Whole life insurance plans offer the highest commission rates, often more than 100% of the total premiums for the first year. Universal life insurance plans typically provide commissions of at least 100% of the premiums for the first year, but this rate decreases if the insured pays above the target level. Term life insurance plans pay the lowest commissions, ranging from 30% to 80% of the annual premiums.
The income potential for life insurance agents can fluctuate based on various factors, including location, experience level, certifications, the types of policies they sell, and the number of policies sold. While there is no cap on a life insurance agent's income, it can be challenging to establish a steady client base, and the job often comes with a high rejection rate.
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Captive vs independent agents
The income of a life insurance agent depends on several factors, including their location, experience, certifications, types of policies sold, and whether they are a captive or independent agent.
Captive vs. Independent Agents:
Captive agents work exclusively with one insurance carrier and are typically contracted and provided with a regular salary, commission, benefits, and support by the parent company. They receive lower commissions than independent agents but benefit from the insurance company's broader marketing strategy and more stable income.
On the other hand, independent agents represent multiple insurance companies, giving them access to a wider range of insurance products. They have more control over their business operations and can offer clients policies from different providers, providing a wider selection of coverage options. However, they are responsible for their own business expenses and generally have higher startup costs. Independent agents typically earn higher commissions but have less stable income than captive agents.
Both captive and independent agents have their advantages and disadvantages, and the choice between the two depends on the agent's preferences, resources, and business goals.
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Highest-paying cities and states
The salary of a life insurance agent varies across the United States, with several factors influencing how much they earn. These factors include location, experience, certifications, types of policies sold, and the number of policies sold.
Highest-Paying States
According to a February 2024 report, these are the top 15 highest-paying states for life insurance agents, based on average annual income:
- Oregon: $86,703
- Nebraska
- South Dakota
- New Hampshire
- Wisconsin
- Alaska
- Rhode Island
- North Dakota
- Ohio
- Wyoming
Highest-Paying Cities
When it comes to the highest-paying cities for life insurance agents, Anchorage, Alaska, takes the top spot. Other cities that offer attractive salaries for life insurance agents include:
- Wichita, Kansas
- Milwaukee, Wisconsin
- Memphis, Tennessee
- Detroit, Michigan
- Omaha, Nebraska
- Toledo, Ohio
- Lincoln, Nebraska
- Fort Wayne, Indiana
- Cleveland, Ohio
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Pros and cons of the career
Pros of being a life insurance agent
- Lucrative: Life insurance agents can make a lot of money, with the average annual salary ranging from $62,000 to $76,000. Some agents make over $100,000 in their first year.
- Minimal entry barriers: While some companies prefer candidates with a college degree, it is not a requirement. Most insurers provide training programs for new agents.
- Multiple job opportunities: There are many job vacancies for life insurance agents, as agencies are always looking to hire as long as there is demand for policies.
- Strong earning potential: Life insurance agents are mostly paid through commissions, so those with a strong work ethic and good relationship-building skills can earn a high income.
- Opportunity to make a positive impact: Life insurance agents help families secure their financial future and ease the financial burden during a difficult time.
- Chance to work with big names: Life insurance agents can work with some of the biggest brands in the industry.
- Flexibility: Life insurance agents can work for themselves or someone else, giving them the freedom to control their affairs or benefit from the stability of working for an established company.
- Specialization: Life insurance agents can specialize in areas such as annuities or group coverage, allowing them to become experts in their field and set themselves apart from competitors.
Cons of being a life insurance agent
- Commission-based earnings: While this can be a benefit for established agents, newcomers to the industry may struggle to find clients and make sales, despite working long hours.
- Difficult product to sell: Most people don't like to think about their mortality, so life insurance can be a challenging product to sell.
- Limited paid time off: Independent life insurance agents often have limited access to employee benefits, including paid time off.
- Rejection and disrespect: Life insurance agents often face rejection and may be treated with disdain or disrespect by potential clients.
- High-pressure work environment: Life insurance professionals often work long hours and are under pressure to meet targets and quotas, which can lead to stress and burnout.
- Difficulty in finding leads: Life insurance agents are often responsible for finding their own customer leads, which can be challenging and time-consuming.
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Frequently asked questions
The average annual salary of life insurance agents ranges from $62,000 to $76,000, with some sources giving a higher estimate of $79,650. However, life insurance agents are mostly paid through commissions, so their income is uncapped and can exceed $100,000.
Life insurance agents typically receive a large upfront commission for every policy sold, ranging from 40% to 100% of the first-year premium. After the first year, they receive smaller commissions for each year the policy is renewed, usually under 5% of the annual premium.
Some life insurance agents receive a base salary, especially if they are captive agents working exclusively for a single insurance company. However, their commission percentage is usually lower.
Life insurance agents can expect their first sales commissions to start rolling in after a few months. However, it may take longer to build a steady client base and establish a consistent income stream.
