How Do Life Insurance Agents Get Paid?

We often hear the question, “How do you get paid?”  It’s an excellent question. How an agent gets paid can influence your shopping decision as you will see below.

When you’re shopping at an appliance store, you want to know how your “consultant” gets paid.  Typically, commission-based salespeople are pushy and less education-oriented.  We’ve all had the experience of a salesperson becoming aggressive and somewhat rude when they learn we have no intention of buying today.  Let’s not even talk about car salespeople…

Life insurance salespeople tend to have the same reputation.  Of course, the stereotypical life insurance agent is the one camping out at your kitchen table until you agree to complete the application forms. Not fun!

You might be shopping online because you detest the idea of a pushy salesperson.  I can’t blame you.  Shopping online is not only smart, but it can be a huge time and money saver.

So, how do we get paid?

All life insurance agents are paid a commission by the insurance companies they represent.

Just like your home and auto insurance agent, we are compensated by commissions.  One of the most challenging aspects to shopping online for life insurance is finding an agent you trust.  It’s important to read reviews (and make sure they are legitimate).

For Free, Instant Term Life (or Term for Life) Quotes, Please Use the Quoting Tool on this Page.

Different Types of Agents

Although it’s true that all insurance agents are paid a commission, not all commissioned agents are the same. Let’s take a look at the different types of agents.

Independent vs Captive Agents

Captive Agents – the Negative

  • A captive agent is one who works for just one life insurance company.  For example, a Northwestern Mutual or New York Life agent is captive and is required to sell their proprietary products.  In limited circumstances they can broker with other carriers, but that is the exception, not the rule.
  • Captive agents tend to focus on whole life or variable universal life products.  We’ve talked to many former captive agents and have learned about the pressure they had to sell products that have very high commissions. That’s the negative aspect of captive agents.
  • Agents that are fairly new (fewer than 3 years) have tremendous pressure to meet quotas. Otherwise, they lose their benefits.  Even if they know a competitor has better products, they will do whatever it takes to make the sale.

Captive Agents – the Positive

  • At least you know where captive agents stand. They will fiercely promote and defend their company and proprietary products.
  • Captive agents are true experts on their company and products.  They don’t need to learn the ins and outs of multiple carriers, so that makes their job somewhat easier.  However, they often “drink the Kool-Aid” and repeat what their managers tell them (I know these are supposed to be positive points).

Independent Agents and Agencies

You might think all independent agents are the same.  They represent many carriers and help you find the very best policy for your situation.  For the most part, that assumption is true.  Independent agents usually have the freedom to work with any carrier (except companies that only work through their captive agents).

However, there can be a huge difference in the type of independent agency.

Mega vs Small Agencies

You have probably discovered that there are many large “independent” agencies online.  However, these large agencies only offer limited carriers.  Typically, they will offer 10 to 12 carriers.  They say they “shop the market”, but the market consists of over 60 life insurance companies.

It is simply too difficult for large agencies to work with many carriers.  From a logistical standpoint, learning the products and processes for many carriers is untenable.

We have written an in-depth article about one of these large agencies – Zander Insurance – HERE.  As you will see, it is possible to pay thousands of dollars more in premium by having a limited choice of carriers.

How Agents at Large Agencies Get Paid

Most of these larger agencies have agents that are paid a base salary and commission.  This can be good in some ways.  They take calls all day long and take their time to assess your situation and provide quotes.  They have an incentive to “close the sale”, but they still have a stable income.

The problem is that you don’t know if your agent is brand new or has the knowledge and experience to help you. We have had people call us saying they were frustrated because they talked to a different person every time they called.  It’s not uncommon for applications to get bogged down when there is a problem obtaining medical records or other underwriting information.


Perhaps you have discovered that the online “mega” agencies are not for you.  So, you’re looking at small independent agents and/or agencies.  That’s usually a good choice.  Typically, small agencies work with well-trained agents and really work hard for you.

Buyer Beware:  Even small, independent agents can steer you towards just one or two carriers.  

We participated in a webinar hosted by an organization that supports independent agents.  The webinar host was interviewing a top independent agent that continually was on the top of their leaderboard.  He explained to us that he was motivated by earning trips.  This agent sold one carrier’s product almost exclusively even though he presented himself as an independent agent.

We feel this is unethical, but what he shared next really floored us.  He said that once he earned the big incentive trip (to Ireland), he decided to sell another carrier’s product so he could earn their trip also.  He wasn’t ashamed to tell us that his primary motivation was earning trips.  Whether or not the product was the best solution for his clients wasn’t even an issue.  Wow!

Granted, that type of salesperson is definitely in the minority, but this frequently occurs on a larger scale.

Many agencies receive higher commission levels based on the volume of business they place with a particular carrier.  So, plenty of “independent” agencies will strongly encourage their agents to place business with just two or three carriers.  This is just a reality in our business.

Call Centers

You don’t want to end up at a call center.  If you complete a quote request form online, then it’s likely you will receive numerous calls and emails from someone at a call center.  Worse yet, if you respond to a robocall, then you will most certainly be inundated with calls.

Most call centers heavily incent their agents to close sales, so they tend to be quite aggressive.  It’s a numbers game and a product transaction. They usually don’t have time to understand your needs and provide customized solutions.  They won’t talk about strategies such as laddering term policies or other ways to reduce your costs.

How Do Life Insurance Agents Get Paid? CONCLUSION

We hope this article didn’t discourage you, but rather armed you with information to make wise decisions. It’s always a good idea to let your agent know you are shopping with at least a couple of other agents.  If they planned on steering you towards their “favorite” carriers, then this will probably change their mindset.

Make sure you are working with an agent that has a minimum of 10 years experience.  It take a lot of time to learn this industry and work with underwriters.

Also, it’s a good idea to make sure your agent is knowledgeable.  Check out reviews and ask hard questions.  Many people don’t have time to research online.  You might simply want to work with a reputable, trustworthy agent.  Just make sure your agent is truly independent.

We’ll be happy to work with you and provide instant quotes and a consultation.  Call us anytime or complete the quote request form.




About Peachtree Insurance Advisors
About Peachtree Insurance Advisors

We work with individuals across the nation to secure the best life insurance rates.

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