How Does an Insurance Agent Make Money?

I have often wondered about how much money does insurance agent make. You may have thought of the same too. The fact is that the question of how does an insurance agent make money is asked by those who want to know.

In this article, I have explained the exact steps these salespeople make money from selling insurance policies. Maybe, you too would be inspired to become an insurance agent so you can make money as well.

Who is an Insurance Agent?

Let’s start by understanding the role of an insurance agent in the policy-selling process. An insurance agent is someone who sells insurance policies to those who need them. Unlike a broker, the insurance agent can work for multiple insurance companies.

By selling these policies, the insurance agent can make money. We will talk about the exact income model these individuals use to earn a living just by selling insurance policies.

How Does Insurance Agent Make Money?

Insurance agents make money through commissions. That is a specificpercentage of the insurance policy they sold.

But that is just the basic income model for these salespeople. Read on to discover other creative ways they make money and live a comfortable lifestyle.

1.    Commission Payments

Insurance agents make a bulk of their income from commissions paid from the policies they sold. The average commission is somewhere between 8% and 15%.

The interesting thing about the commission-based payment is that it is subject to renewal. That is, if the policyholders renew their subscriptions, the insurance agent will also earn a commission.

That is why the commission forms a bulk of the income because of the dual-income basis. Note that the commission range may vary by the insurance company. But it is rare to find an insurance company that exceeds 15% payout on commissions.

2.    How do Insurance Agents Make Money from Professional Advice?

Insurance agents are more of a guide to policyholders. They help put them through on what type of insurance policy to buy. in some cases, the policyholders will need professional advice and that is another way to make money.

By offering their professional advice, insurance agents can get paid per hour.

The advice ranges from:

  • Helping the policyholders in planning their finances.
  • Making deeper policy research on behalf of the policyholders.

Incentive-Based Commissions

There are two (2) types of commissions paid to insurance agents. The first is the base commission, which is the main commission paid per policy sold. Then, there is the incentive-based commission, which is rather unofficial. Only a few insurance companies are willing to offer this. Besides, brokers find it difficult to agree to this because they ought to be the ones earning this and not the insurance agents.

But that’s by the way. Wondering how each of those incentive-based commissions works? They are divided into:

  • Supplemental commissions
  • Contingent commissions

Generally, these incentive-based commissions are a way of encouraging the insurance agents to put in more effort to sell more policies. Insurance companies make these payments based on the overall performance of the qualified/shortlisted insurance agents.

Contingent Commissions are paid to insurance agents at the end of the current year. For example, if an insurance agent named John qualified for the commission, he will be paid sometime in December.

On the other hand, the Supplemental Commissions are paid the next year. The insurance company checks the performances of its agents in the previous year and rewards them the next year. For example, an insurance agent named Joan will get her Supplemental Commissions in January of 2023 for her efforts in selling more policies in 2022.

3.    Insurance Agents Make Money from Both Ways

Some insurance agents double as brokers. That way, they earn what insurance earns and what an insurance agent earns. By serving multiple companies, they have access to more clientele. This comes in handy when they sell more policies to make more money.

How Much Does an Insurance Agent Make?

You now know how insurance agents make their money. Now, let us talk about the exact amount they earn.

The fact is that insurance agents do not have a specific amount of money they earn every month. Except they are placed on a salary, their take-home is not fixed.

However, we can make some assumptions and work our way around it.

First, insurance agents make money from commissions paid per policy they sell. We can make a rough estimate of these commissions. Let’s assume that the agent sells $200 worth of life insurance policy to 30 policyholders.

That amounts to $6,000 generated for the insurance company. Now, if the insurer pays out 10% per policy sold, it means that the insurance agent makes $20 per life insurance policy. Adding that up to 30 policies gives us $600 as the average income for the insurance agent.

On average, the income of an insurance agent is somewhere around $50,000 per year. The more experienced ones can gross up to $100,000 payout in commissions alone every year.

How Does an Insurance Agent Get Paid?

As a policyholder, you must be wondering how your agent makes money? You have tried to contact the insurance company directly but to no avail. Using an agent is always the faster route to getting your policy.

So, does it mean that you are the one paying the agent? On the contrary, the insurance agent isn’t earning directly from you. Rather, the insurance company pays the agent for each successful policy it sold on its behalf.

All the agent needs to do is to find prospective policyholders, pitch the insurer’s policies to them and close the sale. At the end of the day, the insurance company pays the agent the agreed percentage of the policy’s value.

You are only going to pay the insurance agent if you are asking for additional services. This could be financial advice or asking for specific professional services.


You have now gotten answers to your question on how an insurance agent makes money. In addition to commissions, these agents earn passive income from policy renewals and offer specific insurance-related services. The entry-level annual income is around $50,000 while professionals in the industry earn up to $100,000 paycheck per year.


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