Most agents earn a commission, which is a share of the premiums you pay. The biggest share usually comes in the first year of the policy.
A commission is usually a percent of your premium. Some agents only earn commissions. Others also get a salary or bonuses.
NerdWallet says agents often get 60% to 80% of the first year premium on a term policy. They get much less in later years. Over the life of a policy, about 5% to 10% of what you pay may go to commissions.
Permanent policies cost more, so the total commission is bigger. NerdWallet says this can give some agents a reason to push permanent coverage.
If a policy lapses in the first few years, the insurer may make the agent pay back the commission.
In some states, agents must tell you their commission if you ask. In Texas, it is illegal for an agent to replace your policy just to earn a new commission.
- Ask what commission the agent will earn
- Ask why this policy fits you
- Compare quotes from more than one company
- Ask about low load policies with lower fees
More questions
Do I pay the agent on top of my premium?
Usually not. The commission is paid out of the premium you already pay.
Is it OK to ask about commission?
Yes. Some agents may not want to say, but it is fair to ask.
