How Do Life Insurance Agents Get Paid?

Do you find yourself wondering what is in it for your life insurance agent? Often clients will ask how their life insurance agent gets paid. Many times what they are really asking is, are you taking a cut of the deal or are you charging me hidden fees? The reality is, agents are paid from directly the life insurance company based on a percentage of the first years premium. There are no fees or hidden costs associated with working with an agent. The key then is to work with an agent that represents the top 10 best life insurance companies in the U.S. as well as the top no exam companies and not just one or a select few. Let us explain…

How do life insurance agents get paid?

Have you ever wondered how life insurance agents get paid?   Well if you haven’t you should because how a life insurance agent gets paid could very well impact the number of different life insurance options your agent is willing to share with you!

Confused?  Let us explain.

Generally there are two different types of life insurance agents, there are “Broker general agents” and there are “Captive agents”.  What’s the difference?

Let’s take a look:
Broker general life insurance agents:

These are life insurance agents who work for an insurance company whose main function is to sell one or more life insurance products (This is who we are here at TermLife2Go, but in our case, we offer dozens of different life insurance companies).

These types of agents will be paid by their brokerage either with a combination of salary and or commissions or with just commissions.  He or she may also be a full-time employee or operate as an independent contractor that may also be provided with office space and full time benefits.

Captive Life Insurance agents:

Captive life insurance agents on the other hand are agents who only work for one specific life insurance company.  A captive agent is paid by that one insurance company either with a combination of salary and or commissions or with just commissions.  These agents may also be full-time employees or an independent contractor with both office space and benefits as well.

Captive agents will also have considerable in-depth knowledge of their particular company’s insurance products. But they:

Cannot help a client who does not need or does not qualify for that one particular company’s life insurance product.

As a result, captive agents are often put into a situation where:

One size Must Fit All!


Which is better? And who can get me the best price?

This is the odd part. You see, most insurance companies will utilize both types of agents in order to obtain new business.  Meaning that they will have their own “In house” agents writing only their own policies, but will also accept applications from outside “NON-Captive” agents as well.

Why do they do this, you ask?

It’s simple.  Non-captive agents don’t cost an insurance company anything.  These non-captive agents work independently for a brokerage that is not owned by the insurance company directly, so the insurance company themselves don’t:

  • Pay these agents a salary.
  • Don’t supply these agents with office space, vehicle allowances.
  • Provide full time benefits such as medical, dental, etc, etc…

So in other words, insurance companies love to receive life insurance applications from non-captive agents because dollar for dollar they are much more profitable!

That being said, because of the strict rules and regulations surrounding the life insurance industry, pricing must be fixed!

Meaning that it doesn’t matter who you purchase your policy from, whether it be from an independent brokerage or from the life insurance company itself, the price will be the same!
So if the price is the same, why choose a broker/middle man?  Wouldn’t it be easier going directly through the insurance company?

Well let’s look at a real life scenario’s that takes place nearly everyday here at TermLife2Go.

Scenario #1.

42 year old male in good health, does not use any tobacco products, and is not taking any prescription medications.  Or in other words, someone who will most likely be eligible for a preferred plus rate class.

In this scenario, all is well until we learn that instead of being 5’9” 184 lbs, our applicant is actually 5’9” 197 lbs.  Now while this may not seem like all that big of a deal at first, what this difference actually means is that they will no longer be eligible for the best rate class for most life insurance carriers.

Now if this client has applied for life insurance with a “Captive Agent” they will now have to settle for the next best possible rate class which in this example would result in an 18% increase in the originally quoted price.

This is where the advantage of using a non-captive agent comes into play. Because in this situation, a non-captive agent would simply be able to seek out an alternative insurance company, one that is not so strict when it comes to ones weight and still be able to lock in a Preferred Plus rate class for their client, saving them $100’s if not $1000’s of dollars over the course of their life insurance policy.

Other commonly encountered issues where it pays to work with a “Non-captive agent”.

How about when you’re not perfect!

With hundreds of different life insurance companies out there, there is an incredible amount of competition among insurance companies to earn your business.  As a result, certain insurance companies will take on certain “niches” to earn market share.

For example, some insurance companies what to be the:

The trick, and why you’ll need a professional life insurance agent, is knowing which insurance company is best under any given circumstance.

The Best Thing About Applying for Life Insurance

We tell people all the time, that the best thing about applying for life insurance is that it’s free to the applicant no matter what they decide.

So even if you’ve already applied for life insurance with another company, or you’ve just put in place a brand new life insurance policy on yourself you really don’t have anything to lose by seeing what we here at TermLife2Go can do for you.  In fact, if you have copies or can get copies of the medical exam that you just recently taken, we can use these rather than set up a whole new medical exam and get you approved much, much faster than you can image!


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