If you look at advertisements for insurance agents and producers, you might get hung up on the word commission. When your income is tied to how much you sell, answering a question as simple as “How much do insurance agents make?” can be more complicated than what job boards might tell you. Some might even consider it daunting to explain. For those who are confused or intimidated by commission, we break it down below.
How do insurance commission rates and commission structures work?
Insurance commission rates vary by carrier and policy. Here’s a model of how commission works: Let’s say one of your clients offers a form of coverage you offer to its employees, and 12 employees opt in. Using simple numbers for example purposes, let’s say coverage costs each employee $5 a week, taken out of his or her weekly paycheck, so each employee pays $260 per year. For 12 employees, that’s a grand total of $3,120. Let’s say your commission rate on these policies is 30%, so you would receive $936 that year, just for those 12 people.
Because an insurance agent’s salary is on a commission basis, it really is up to each agent to determine what his or her annual income target is. Using the previously mentioned example numbers at that selling activity level every week for a year, the agent could generate over $48,000 in commissions in his or her first year. Aflac recruiters consider this a reasonable goal that a first-year agent working full time could achieve. Those who want to earn more can increase their activity levels to meet their personal income goals.
Knowing that the first year can be daunting, some carriers offer new agents bonuses to supplement their income and incentivize performance. First-year Aflac agents who hit every bonus benchmark wind up earning $13,700 in bonuses alone. But even first-year agents who don’t hit every benchmark have ample bonus potential. For example, you open two new accounts totaling $15,000 in annualized premiums within your first eight weeks, you will earn a $1,200 bonus.1
Aflac also offers a distinct advantage in that, unlike many other commission structures, agents are paid part of their commission as soon as coverage is issued. That means you don’t have to wait until a policyholder actually starts paying for coverage before you see money in your account.
Differences in licensed insurance agent salary based on average years’ experience
Insurance agents don’t actually earn salaries, because they’re independent business owners in charge of their own income. But the longer you’re an agent, the greater your income potential, generally speaking – you’ll get better at your work, you’ll start getting referrals and your existing clients may grow. As with your first year, how much you sell determines how much you make. So if you want to slow down to focus on other parts of your life, you can do so – and if you want to floor the gas pedal, you can do that too.
But if you work with a carrier that pays renewal commissions, the amount an insurance agent can make per policy can get a little sweeter. In short, renewal commissions pay you for work that’s essentially already done, as long as that work is still in play.
When he’s explaining renewal commissions to new agents, Reese Golchin, a market recruiter for Aflac in North Carolina, uses an example we all know: Beyoncé’s “Single Ladies,” which has earned more than $10 million to date.2,3
The songwriters behind “Single Ladies” made money when the song first came out, sure. But every time “Single Ladies” is used in a movie, is streamed by fans or is played at an event, the songwriters earn royalties – a payment based on work they did the heavy lifting on years ago, because that work is still in use. They haven’t written a new song, and they might not even be in the songwriting business any longer. But the royalty checks will keep coming their way as long as that song is in use.
Golchin’s lesson? “You need to think of insurance policies the way you think of pop songs.” If you work with a carrier that uses renewal commissions, such as Aflac, you earn “royalties”: payment for work on which you’ve already done the heavy lifting.
Let’s go back to the 12 employees who bought your coverage. When those 12 employees renew their policies the following year, you receive a renewal commission – without having to sell the policy all over again. If those 12 employees’ renewed policies earn you a commission of, say, 6% on that $3,120, that comes out to a renewal commission of $187. You get that $187 even though the hard work of the initial sale is already done. The best agents will maintain their relationships with clients and policyholders throughout the year to ensure they are satisfied with their coverage – in part because when an employee lets her policy lapse, that policy stops earning renewal commission. It’s also a chance to meet with new employees who might purchase a policy, adding to the agent’s commission. In this business, helping people pays.
Once you’ve been an Aflac agent for two years, you’re 50% vested in renewal commissions, meaning that you could leave Aflac and still get 50% of your renewal commissions. After five years of service, that vested percentage goes to 75%; after 10, you’re 100% vested. That means that even if you leave Aflac after two years, as long as those 12 employees keep their policies, you get $93 a year from work you did two years ago (50% of the original $187). If you leave after five years? It jumps to $140 if the policies stay in force. And after 10 years, that renewal is yours in its entirety for as long as the policies stay in force.
Another route some agents choose: working with insurance brokers. When you partner with brokers, commission to you may not be as high as they are when you work independently because there may be additional parties taking a percentage of the sales. But the trade-off is that brokers have done part of the legwork by cultivating client relationships that they introduce you to. They often work with larger businesses and can include you in their network of business contacts, saving you from having to do the prospecting labor with those companies. So even if your per-policy commission is lower, if you’re selling 300 policies in one fell swoop as opposed to 30, the increase in volume can be worth it.
The truth about insurance agent commission rates
“People can be intimidated when they hear ‘commission,’” says Meaghan Mutrie, a market recruiter for Aflac based in New England. “But compensation depends on the time and work you put in. It’s an opportunity to adjust your income goals to what your needs are – you get to set what that looks like.”4
The good thing about a traditional salaried position is that even if you’re having an off week – or an off year – your paycheck stays the same. But the downside of a salaried position is that you could be outperforming your peers, doing the best work of your life... and your paycheck stays the same. You’re also at the mercy of your employer as to how long you stay on board; layoffs and reductions in hours are beyond your control.
In contrast, an insurance producer’s income is determined by her own drive, her own ambition, her own desire to earn. And her own lifestyle: Agents can work part time while focusing on other areas of life.
The truth about insurance agent commission income boils down to this: It’s what you want it to be, not what a company decides is right for you. That can be nerve-wracking at first – but quickly, it looks more like freedom.
Aflac agents are independent agents of Aflac, and are not employees of Aflac.
1 Aflac company information 2021.
2 “How Much Money Every Beyoncé Song Has Made.” Money Nation. Published April 15, 2016. Accessed 12.1.2020.
3 Reese Golchin, personal interview, 11.25.2020.
4 Meaghan Mutrie, personal interview, 11.24.2020.
Agent commission may vary due to policies and riders. Advance commission may not be available on all policies. Commissions are based on commission code per policy.