Insurance Q&A: “How much do insurance agents make?”

Just like any other commission based sales job in the world, the sky is the limit as far as income goes for an insurance agent. However, it’s not that cut-and-dry.

There are a number of ways to get into the industry as a sales agent and a lot of products to potentially master and sell. How much you get paid depends on where you start.

It’s also worth noting that, just like any other sales job, you should not expect to earn very much money until you have built a solid client base. This can take anywhere from 2-5 years depending on how hard you beat the pavement.

Expect 10 “No’s” for every single “Yes.” This means you will likely “pitch” to 100 people to sell 10 insurance policies, which should be at least half of the sales you’ll need to make to earn some decent money every single month. If you’re not already scared, keep reading.

How Property and Casualty Insurance Agents Are Paid

Typically, an insurance agent is paid a commission, or percentage, of the total insurance premium the insurer charges for a given policy. Property and Casualty (auto, home and business) insurance agents typically earn anywhere between 7% and 20% commission on each policy sold. If you forced us to come up with a solid number, we’d say 12% is what you can expect on average.

Example: $1,000 auto insurance policy at 12% commission would net you $120.00

Each year, assuming your client is still happy and continues to insure with you, you will earn a “renewal” commission. Renewals are where the money’s at, as you do not have to advertise or spend time quoting the policy for it to renew.

If the client makes the renewal payment, you get paid again…it may even happen when you’re sleeping. Renewal policy commissions are often slightly less than the initial commission you get paid for the “new business.” New business may be 15% and renewals only 10%.

As you can see, a few years into the process of building your “book” of business, the renewals from previous years virtually make your income exponential. There are few products you can sell where you get paid each year, whether you worked with the customer or not.

Example: Last year’s auto policy from the example above renews ($120.00) and you sell a new auto policy on the same day the following year, earning another $120.00 – your income for that day is now $240.00. Not a bad day’s work.

The average insurance agency, if run well, should have a target of retaining 90% of the previous year’s business.

You might lose 10% of the previous year’s business from unhappy clients who didn’t feel their insurance claim was handled well, so they shopped around and found cheaper insurance…or maybe their third cousin became an agent and they simply switched their insurance policy to him or her.

How Life & Health Insurance Agents Are Paid

Life and Health insurance agents get paid a little differently. There is still a commission, but quite a bit more is paid upfront compared to property and casualty insurance. There are also renewal commissions, but these are paid at a much lower percentage (although maybe not less overall money than a property and casualty policy, as the premium is often substantially higher).

Example: You sell a $10,000 whole life insurance policy and receive 55% commission for the first year, which is $5,500. The renewal commission may be as low as 3%, which still nets you $300 per year.

Some life insurance companies may pay as much as the entire first year’s premium as a commission, and then not offer renewal money. The combinations of new and renewal commission for life and health insurance can vary greatly depending on the company.

Do You Want to Own an Insurance Agency or Work for One?

How much money you earn as an insurance sales agent can also vary greatly based on whether you start your own agency or work your way up at an existing agency. Of course, there are pros and cons to both options.

In the long run, if you’re getting into insurance sales so you can afford a yacht, being the agency owner is your goal.

It’s the same as any other industry. You make more money as an employer (if you’re good enough) than as an employee, but it requires more work.

Insurance Agency Owner

Expect to make much less in the short run if you open your own insurance agency, as every dime of your income from sales will be put back into keeping the bills paid and the doors open for the first couple of years. BUT, and this is a huge “but,” you’ll make significantly more money in the long run as an agency owner…if you can manage to stay in business.

Many insurance agencies are handed down to family members or simply purchased by someone who has enough money to buy one and doesn’t want to take the time to build the business from scratch.

Agent in Someone Else’s Insurance Agency

If you are new to the industry, you will likely start as a Customer Service Representative (CSR). If you are good enough at the job, and decide you like insurance enough, you may be able to “move up” to an agent, working on behalf of your employer.

The upside to this method is that you earn money immediately upon selling an insurance policy. You do not have to pay the phone bill, rent, utilities, insurance (yes, insurance agents need insurance), etc. That’s the owner’s problem.

You might expect to have your expenses paid, and in a large enough insurance agency, a processor to do your paperwork…which is a good portion of the job.

The downside is that you will be splitting your commission earnings with the owner of the agency you work for. After all, the insurance companies who offer these products will not let “anyone off the street” represent them and sell their insurance. If you’re new to the industry, you will have to ride someone else’s coat tails until you get your footing.

Captive or Independent?

You will also have the option of being a captive agent or trying to become an independent insurance agent. Captive agents typically sell insurance for only one company, whereas an independent agent sells insurance for multiple different companies.

Captive Agents

For captive agents, think Farmers and State Farm. This option is great for people who don’t know the first thing about insurance. Pass a “sales aptitude” test and you’re off to the races with these types of insurers.

Many captive agents switch over to becoming independent agents after enough time in the industry, as captive insurers typically have a limited “appetite” from an underwriting standpoint. You will turn many clients away if State Farm does not want to insure the individual because they are “too risky.”

After becoming a successful captive agent and building your confidence, you may decide that you want the ability to insure anyone who walks through the door. This means you want to be an independent agent.

Independent Agents

It’s much harder to become an independent agent, as you actually have to prove you know what you’re talking about to represent the various insurance companies.

You’ll very likely need to demonstrate that you have previously sold a lot of insurance to qualify for a contract to sell insurance products independently. The commissions are higher here, but you need to satisfy multiple insurer’s requirements from a policy standpoint.

You may represent 10 companies, and each of them could expect you to sell a minimum of five policies per month, or they will terminate your contract and not allow you to sell their product anymore.

So going independent will likely require a few years of experience in the industry, starting by working with an existing independent agency or buying one.

To sum it up, there are a number of different ways you can make money as an insurance agent, and what you put in is what you’ll get out, much like any other sales job. Don’t expect it to be easy.

Insurance Q&A: “What is a waiver of premium provision?”

We purchase insurance with the idea that it’ll be there when we need it. But an obvious downside is that it doesn’t work if you don’t pay for it.

So what happens if you become ill or disabled and cannot work, and therefore cannot pay your premiums?

You guessed it; your insurance company will cancel your policy. Can you blame them? McDonalds probably won’t give you a burger if you don’t pay for it, so why should insurance be any different?

Part of being a savvy insurance consumer is being educated on what types of coverage are available to ensure you do not suffer financial setbacks as a result of an unplanned event.

This is where the “waiver of premium provision” will come into play on a life, health or long term care insurance policy.

No Cost Insurance?

Not so fast. This is not a free insurance policy. The waiver of premium provision is a rider that can be attached to an existing policy for an additional cost, which may vary based on your age, risk level, policy type, and more.

The rider suspends your insurance premium payments in the event you become ill or disabled and cannot work (and pays premiums).

So it’s sort of like insurance for your insurance. That’s right. You pay extra money while you’re healthy, but will be in good shape in the event something throws you off track.

Not a bad idea. After all, the last thing you need if sick or disabled is a cancelled life, health or disability policy.

How It Works

What does the provision look like in action? Well, it’s not automatic.  You have to provide evidence to the insurer that you aren’t physically able to work.

This is almost always accomplished by consulting a physician who can verify that you are in fact disabled or too ill to make ends meet.

Evidence that the “event” took place during the specified policy period is also a requirement. Proving this is the doctor’s duty as well.

After the facts are established, insurers may demand a 90-day waiting period before they actually waive premium payments.

Keep in mind that this rider is not designed to stop premium payments for minor events. If you’re not “out of the game” for at least 90 days, expect your insurance bills to keep coming.

The good news is the waiver is usually retroactive, meaning once the timeline requirements are met (90 days pass), you can expect to receive the money you paid during the waiting period.

Read more: Why you need health insurance.

(photo: Gruenemann)

We just couldn’t help ourselves. TTAI doesn’t take its eye off the ball even over the Holidays. Each year many of us make a list of resolutions that likely won’t last through January…the author of this article included. Mostly, our resolutions are about lifestyle changes. Lose weight, eat better, and spend more time with loved ones.

But what about some resolutions that may save hundreds of dollars in insurance premium or thousands of dollars when it comes to insurance claims?

The insurance resolutions below may only take a few minutes to complete, but the benefits may last a lifetime!

Without further ado, here are the top 10 insurance resolutions for 2012 (and every year after).

1. Get Online Quotes – It takes all of five minutes and may save you hundreds of dollars in premiums. You’re already online. Get some insurance quotes and stop wondering if you are overpaying for coverage.

Tip: How to get the best online insurance quote.

2. Ask for Discounts – If you own a television set, you know discounts are all-the-rage, as insurers fight to retain your business.

Tip: You need a new agent if your current agent recommends increasing deductibles or lowering coverage to save money when you inquire about discounts.

3. Bundle Home and Auto – You may earn discounts if you get both your home and auto insurance with the same insurer.

Tip: Don’t settle for just the discount. Shop online and see if you are still paying too much. Every insurer has different rates. Bundling with your current insurer may still be more expensive than switching to another insurer altogether.

4. Consult an Independent Agent – The days of driving to the closest State Farm, Farmers or Allstate agency and paying whatever they ask are over. Independent insurance agents can often get you better coverage at a lower premium.

Tip: The companies independent agents represent don’t spend $500,000,000 of your premium dollars on advertising each year. Chain insurers are the “insurance equivalent” of Bank of America.

5. Get Renters Insurance – Renters insurance is one of the cheapest insurance policies out there…think $200-$400 per year. Just because you rent doesn’t mean you cannot suffer a huge property or liability loss. Can you afford to re-purchase everything in your apartment if it burns down this year?

Tip: Your landlord’s insurance policy does not cover your “stuff.”

6. Review Your Current Coverage – Do you still pay for comprehensive and collision insurance (full coverage) on your 15-year-old car? Do yourself a favor and drop that coverage if your car isn’t worth that much anymore.

Tip: Your auto insurance company will pay you the LESSER of the cost to repair or replace your damaged vehicle or it’s actual cash value at the time of the loss…regardless of how much it means to you personally or how much you pay to insure it.

(Why do insurance companies total cars?)

7. Inventory Your Personal Property – Do you have a list of everything you own? We didn’t think so. You will be required to provide an inventory of your contents in the event your personal property is lost, stolen or damaged and provide it to you insurer. Take video, pictures or write a list and keep it in a safe place. We recommend uploading this list to your email account, where you can access it from any computer on planet Earth that has an Internet connection.

Tip: Do you want to make that list now while you still have your “stuff”…or from a hotel room after your home or apartment has burned down. We’ll bet you a shiny nickel you’ll miss a few things if your home burnt down. Also, you insurer doesn’t just write you a check for your “Contents” limit; you must provide a list to them in the event of a loss.

8. Research Your Current Insurer – We’re not talking reading angry posts on the Internet from individuals who didn’t follow steps 1-7 above. We’re talking court cases here. Many large chain insurers are currently being sued by the states in which they conduct business. The lawsuits range from overcharging for coverage to underestimating your home’s replacement cost (to keep their premiums lower). You have the Internet…use it.

Tip: Google the phrase “lawsuit” and any company who advertises on television every 30 seconds and you’ll see the light.

9. Read Your Policy – Even TTAI knows this isn’t fun. But would you rather find out you didn’t have coverage for a particular loss after it happens or before? While the policy language is mind numbing, you’ll find that asking your agent of insurer for a laymen’s terms explanation of a particular coverage is pretty easy.

Tip: Your agent will not be attentive after a claim if she/he isn’t attentive to your coverage questions prior to a claim. Again, do you want to know what kind of agent you have before or after you file a claim?

10. Stick to Your Resolution – Just like laying off the chocolate or soda, real results come from continued discipline and effort. “Set it and forget it” works for cooking a turkey…not for your insurance. This is one of your top expenses in the budget. Treat it as such.

(photo: John Brennan)

A certain unnamed TTAI staff member recently went in for their “free” annual physical. Many health insurers offer this as a preventative measure against major medical problems that may go undiscovered without routine screenings. Sounds simple enough…right? Wrong.

You probably already know that most doctor visits aren’t free, but just how much you’ll be on the hook for seems to be a mystery until the final bill arrives.

If you’ve been to your doctor recently, you likely heard the phrase, “we will bill your insurer and send you a bill for whatever they don’t cover.”

It can be a little disconcerting to think about the “surprise” bill you’ll get in the mail in the next few weeks.

But what if there was a magical way to determine exactly how much your bill will be? Enter the Aetna Payment Estimator.

What is the Aetna Payment Estimator?

NaviNet, the nation’s largest real-time healthcare communications network, has created a piece of computer software called the “Aetna Payment Estimator” that estimates the cost of services for doctors and their patients.

Simply put, the software automatically tallies the costs of medical services performed in real-time by using the member’s benefits plan details and provider fee schedules to provide an estimate of their financial responsibility.

The amount that isn’t covered is your out-of-pocket expense for the visit.

The simplest example would be calculating the cost of your copay, deductible and coinsurance and subtracting it from the cost of your overall visit. Anyone with private (non-employer sponsored) healthcare insurance knows this isn’t necessarily that easy!

(Can I get health insurance without a job?)

The Benefits

1. No surprises – this is the biggie. You can get an accurate estimate of a future bill today. Being prepared for a costly medical bill is helpful in more ways than we can count, not least of which is peace of mind.

2. Lower bills – You may opt to forego certain medical tests if you know they are not covered prior to having them performed. Anyone who has received a large surprise bill would likely agree they could have skipped a few of the “services” that ended up costing much more than they expected.

3. Better planning – Knowing just how much is due and when will help you set aside the necessary funds so you can pay the bill in full, as opposed to opting for a payment plan that costs you more.

Any Downside?

We’re glad you asked. First, if Aetna is not your healthcare provider, you can expect to do things the old-fashioned way, which means increased stress levels after your visit while you wait for your bill to arrive.

However, Aetna’s Payment Estimator is no perfect angel either. It relies on you selecting the proper procedures and services, and hoping they match up with those which your doctor uses.

If different codes are used, your estimate may be way off. The estimate could also be “unsuccessful” if the submitted procedure requires review, or if the provider does not participate with Aetna or the patient’s network.

Another potential drawback is that Aetna’s Payment Estimator provides real time estimates. This means your estimate may be “off” if you have visited multiple healthcare providers within a certain time frame.

There is no way (currently) for the program to differentiate between what you owe for “today’s” visit and “last week’s” visit. You will only see the grand total for all “claims” being processed at any given time. So your estimate will show the total amount due for all current charges.

Final Word

While this seems like a great idea, at the end of the day it’s just an “estimator.” In other words, expect prices to vary, and for arguments to ensue.

It’s certainly not a strong reason to stay with or switch to Aetna, but it is an added frill to increase transparency in the often overly complicated medical industry.

And it’s not necessarily always a great idea to make health decisions based on cost, especially if they’re pressing issues. Perhaps having a better health insurance plan is the way to go.

Take the time to compare health insurance quotes online and/or visit an independent agent to ensure you get the best deal for your health coverage needs.

Read more: Top 10 health insurance companies.

(photo: colinmford)

Spoiler alert! Yes, it is generally bad news to allow your insurance to lapse, no matter what type of insurance you’re talking about.

Insurers don’t like it for a few different reasons, and in most cases, you can expect to shell out more of your hard-earned dollars if you let your coverage expire.

Why Do Insurers Hate Lapsed Coverage?

Insurance is a business of promises…and paperwork…lots of paperwork. Any time a policy lapses, i.e. your coverage stops because you stop making payments on time or let a policy expire without another policy lined up, the insurance company has more work to do.

It begins with the agent or customer service representative who has to take you phone call in order to set up a new policy or reinstate the policy that lapsed.

Once the phone call is handled, the paperwork begins. You may have to sign a “statement of no loss” if you are reinstating an existing policy (which proves you didn’t have a claim while the coverage lapsed) or completely re-write your insurance policy, which means starting at the beginning again.

Big deal, right? Some paperwork. Why are insurance companies complaining about paperwork? Well, there are also financial costs involved with getting you back on track.

Not to mention the profit the insurer expects to make is calculated assuming your policy only has to be “touched” once per term, assuming there is no insurance claim activity.

(How do insurance companies make money?)

Additionally, the insurer may have to re-run your insurance score, MVR and C.L.U.E reports, which all cost money.

Each time the policy is “touched,” the overall profit margin shrinks. Again, who cares, right? Insurers make a lot of money and this is the nature of the business. Think again.

Your Cost For a Lapse In Coverage

There are a number of ways you can be “dinged” for allowing your coverage to lapse. First, the obvious “reinstatement” fee. Remember the reports and paperwork from earlier. Well, don’t think the insurers are just going to eat that cost.

You may be able to get away with one short-term lapse on a policy by getting the fee waived, but let it happen twice or more and you can expect to start paying the fee regularly. If you are having trouble making the payment as is, you’ll certainly struggle if your insurer tacks on a $25 fee each time you’re late.

This fee can be the least of your problems if you are a habitual offender. Lapse too many times or for too long of a period, and the insurer may choose not to reinstate your current policy. Now you are in the re-write stage, where you can expect to re-pay the non-refundable policy fee…on top of making the last payment you missed to “catch up.”

What If My Insurer Won’t Reinstate My Current Policy?

So you’ve lapsed one too many times or for an extended period of time…this may result in your insurer refusing to re-issue a new policy for you because your policy was inactive for too long a period of time.

Now you may have to obtain coverage from a different type of insurer, one who will certainly charge you more for you overall policy.

Why? Because the new insurer doesn’t use fees to get you in line…they simply make you pay more from the beginning, as the cost of doing business with people who allow their policy to lapse is “built in” to their pricing structure.

But wait…there’s more! You may lose out on discounts for previous, non-lapsed, coverage. The same policy may cost much more with a previous lapse in coverage than it would for someone with continuous coverage for a certain period of time.

Special Tip for Home Insurance

Make it a habit to keep your home insurance paid up to date, especially if you have a mortgage. Your lender will be notified if your home coverage lapses.

If this occurs, you will enter the world of lender forced property coverage.

Not only does this coverage not protect your home’s contents or your liability (neither are of the slightest concern to your lender), but it can cost as much as three times what coverage would cost from an actual insurer.

Worst Case Scenario?

This depends on the type of policy we’re discussing. None are good, but let’s take a look at some possible outcomes of a lapse in coverage with different policies:

Car Insurance: You cause an accident that “totals you car” and someone else’s. The other driver is taken to the hospital with a severe neck injury – Result? Pull out your check book and get a second and third job to pay for all of the damages out of your own pocket…as well as your bankruptcy lawyer’s fees.

Life Insurance: You miss a payment and the coverage lapses. You die and your family is left with a mountain of bills and none of your much needed income. “Thanks Dad!”

Home Insurance: You were dropped by one insurer and didn’t bother to pick up a new policy…during tornado season.

You see where we are going with this. Have fun repaying the mortgage for the next 30 years, while living in your parents’ basement.

In summary, make it a habit to ensure your insurance payments are up-to-date and never lapse.

No matter what’s standing in the way of making the payment on time, try to imagine how “busy” or difficult your life would be if any of the above examples happened to you.

Read more: Is insurance paid monthly or yearly?

Insurance Q&A: “What is an insurance rider?”

Similar to an insurance endorsement, a rider is a provision added to a policy that adds additional coverage beyond what is offered on the standard coverage form.

But why is this necessary? Why doesn’t the policy simply cover everything? Good questions. The answer is quite simple. Not everybody has the same risk factors.

There may be coverage you need that another doesn’t, or vice versa. Would you rather pay more for insurance coverage you don’t need, or add it only if you need it?

The Basic Policy

The basic policy form, whether auto, home, life or health, contains coverage that is reasonably expected to be necessary by the broadest group of people possible.

For example, a homeowners insurance policy always contains coverage for the home’s contents…you don’t have to ask for it. It’s assumed we all have personal property inside our homes.

However, you will need to purchase a rider for your policy to cover your $25,000 diamond ring – an item we can certainly agree requires special coverage and is not necessarily a “common” item in a U.S. home.

(Is jewelry covered under homeowners insurance?)

Enter the Insurance Rider

The rider you purchase is an additional option to the basic policy. It is not a standalone insurance policy. In fact, you wouldn’t want it to be if you can avoid it.

Why? There are base costs associated with each policy an insurer issues. These include underwriting costs, paperwork, postage and so on. These costs are “built in” to each policy an insurer sells.

Two separate policies equals separate “costs” for you. It’s often easier and more cost effective to add coverage to an existing policy rather than to purchase two.

Examples of Riders

Let’s take a look at one of each to give you a basic idea of what’s available out there. Keep in mind there are probably hundreds (or more) riders available in the insurance marketplace.

Car Insurance – Rental reimbursement and towing coverage are two good examples. The basic auto insurance policy does not include this coverage…you have to add it.

Health Insurance – If you have a pre-existing health condition, a rider excluding the issue may be put in place to allow you to qualify for coverage. Without this rider, the insurer may deny coverage or greatly increase your insurance premium.

Home Insurance – Perhaps you own two homes and want to extend your liability coverage from your primary residence to your second home. This can be accomplished with a rider.

Life Insurance – Accidental death coverage may be added to the basic life insurance policy. Perhaps the benefit is doubled if you die as a result of an accident.

Again, there is no shortage of riders out there. Be sure to clarify exactly what coverage you have on your basic policy before entertaining the rider. You might already be covered adequately and not need to pony up the extra cash.

Also, make sure you understand the rider you’re looking at. It may be more or less restrictive than the existing coverage.

Yes, you read that right. Riders may also exclude coverage as a way to save you money. Be very careful with riders that are restrictive in nature.

Saving a few bucks may sound like a good idea when buying your policy, but you don’t want to hear, “You’re not covered” come claim time.

Insurance Q&A: “What is an insurance quote?”

“Call today for a quote…Click here for a quote…See your local insurance agent for a quote.”

It never ends. We are constantly pestered by ads on TV, the radio and the Internet to “get quotes” to save money on our insurance.

But, what exactly is a quote? The answer depends on where you get it, who you get it from and most importantly, how much (or little) information you provide.

Don’t Quote Us on This

An insurance quote is a projected premium you can expect to pay for a particular insurance policy for a certain period of time.

You may get a verbal quote over the phone or a written quote delivered by mail or via the Internet.  You may even see an “advertised quote” such as $19.99 per month.

All that said, it may be easier to explain things by illustrating what an insurance quote IS NOT.

An insurance quote may not be a final premium:

Your quote is typically a “ballpark” figure, meaning the price you are offered is not set in stone. Your final insurance premium may be higher or lower when it’s all said and done.

As pointed out above, the accuracy of your initial insurance quote depends on how much information you provide to the company preparing your quote.

For example, a company that only asks you to provide your age, sex and how many speeding tickets you’ve had in three years is not going to provide you with a solid insurance quote.

On the other end of the spectrum, if you provide very detailed information such as your name, social security number, insurance score, driver’s license number and vehicle VIN, you will likely wind up with a very solid reliable quote.

(Are online insurance quotes accurate?)

Generally, it is this aspect of the insurance quote process that frustrates consumers the most.  Essentially being quoted one price and paying something significantly higher once everything is said and done.

An insurance quote is not a policy:

You may obtain 10 different quotes for your insurance. But until you answer every question the insurer or agent asks, sign an application and (in most cases) make a down payment to start the policy, you don’t have any insurance.

In fact, if you look carefully, you may find a statement somewhere on a written quote that states, “This quote is provided without cost or obligation. It is not a contract or binder of coverage,” or something to that effect.

(10 ways to lower your insurance car premium)

The Good, The Bad and The Sleazy

There is no shortage of above-the-board insurers, agents and websites that can and will provide you with an accurate insurance quote.

As consumers, we simply need to be alert when shopping for insurance to avoid those offering anything less.

If something sounds too good to be true, it probably is.  Simply move on to the next insurer.

And again, if you didn’t have to provide any personal information to obtain your quote, it’s likely garbage. Period.

Read more: How to get the best insurance quote.

Like it or not, insurance takes a good chunk out of just about everyone’s budget. But what’s worse is being “overcharged for your insurance.”

Of course, the phrase “overcharged” implies price gouging of some kind, which probably isn’t the case in the largely homogenous insurance realm. Put another way, you may be paying too much for your insurance.

Here are a couple of things to look out for when shopping for insurance to ensure you get the lowest price possible.

Don’t be afraid to ask the following questions when you’ve got an insurance agent or representative on the phone (hopefully, an agent).

Getting That Right Price

1. Why do I need this much coverage? Whether it’s auto or life insurance; if you’re being offered coverage that seems a little heavy, ask the agent to explain why you need that much.

A college student with no assets and no income to speak of may not need the $1,000,000 life insurance policy or the highest auto liability coverage available in state.

For the record, it is recommended that you purchase as much coverage as you can reasonably afford. Budget for insurance prior to your mobile phone!

2. What are these FEES for? Many insurers add policy fees to the price of their actual “coverage” insurance premium. There’s nothing you can do about that. BUT, if you see an “agency” fee anywhere on your invoice…ask about it.

Odds are it’s the agent adding a few bucks to his or her commission. Policy fees are normal for insurance brokers, who don’t receive a commission from the insurer, or if using a “general agency.”

However, you’re everyday run of the mill standard auto and homeowners insurance shouldn’t earn the agent an additional fee. Agency fees are common with commercial insurance as well.

3. Are there any discounts available to me? Most standard market insurers are “discount crazy” nowadays. Make sure to at least ask your agent to double check your policy…especially at renewal, as insurers may have made more discounts available since you originally purchased your policy.

Tip: Discounts are great, but don’t get too carried away. If you are offered a lower premium with no discounts than another insurer who has given you discounts out the whazoo; take the lower premium.

The term “discount” has become has become such a buzzword in insurance advertising that many people actually argue about a lower premium that “doesn’t have enough discounts.”

4. Why is this policy better than the other? Assuming you went to an independent agent and got multiple insurance quotes, ask why your agent chose to present you with the quote you received? Is it coverage, price, ease of use, insurance claims handling or a combination of all of those.

If the agent doesn’t have a particular reason, he or she is just selling on price…which may work just fine for you. However, you may feel overcharged after a poor claims experience than you did when you bought the cheapest insurance available.

5. Insurance agents typically issue a policy, and then don’t think about it ever again unless you call or file a claim. They may not “shop” your policy for you every year. Be sure to call your agent if your policy premium increases at renewal. Your agent might just say, “yep, that looks too high, let’s have some other companies quote this for you.”

HINT: This only works if you have an independent agent who can switch insurers for you. If your agent only represents one insurer (captive agent), State Farm for example, they are not going to be able to shop your premium.

If the premium increases, you simply have to pay more for your insurance if you choose to stay with that company.

Read more: 10 ways to lower your car insurance premium.

Insurance Q&A: “Are insurance quotes free?”

It’s quite common for insurance related advertisements to end with, “Call today for a free quote!”

That magical offer might lead the average insurance consumer to believe getting quotes from another company would cost them some hard earned money.

But, is that really the case? It’s questions like this that keep us here at TheTruthAboutInsurance going.

The Reality

Insurance quotes are free anywhere you go. That’s right, no charge! We aren’t aware of any insurance company or insurance agent out there who is charging for an insurance premium quote. That’d be counterintuitive, don’t you think?

Almost all personal lines insurers in the United States use computer software to provide customers with insurance quotes. It shouldn’t take more than a few minutes to generate some numbers…and if they’re good numbers, the insurance company stands to make a buck. And another buck at renewal time each year…

“Back in the day,” quoting insurance was a laborious, time consuming event. Charging for quotes back then may have at least been reasonable/justifiable. A lot of time may have been “wasted” by an agent who quoted several policies per day and didn’t sell anything…and time is money. Or more accurately, was money.

Hello Internet!

With the advent of the Internet, multiple insurance quotes can now be obtained in less than 5 minutes by simply providing some basic information one time.

Not only that, but policies can be purchased without ever meeting an agent face-to-face or visiting and insurance company’s office to sign the paperwork! We know, it’s amazing…

But the competition is fierce now. Consumers are no longer limited to purchasing a policy from one of the 3-5 local agents in their area.

In fact, if you live in California, you can buy a policy from an agent in New York (if the NY agent is licensed in CA) if that’s the best deal around!

(Do insurance quotes affect credit score?)

To summarize, any insurer or agent who would charge you for this readily available, free service would likely be asking to go out of business. If someone tries to charge you for an insurance quote, RUN! Or simply hang up the phone and call someone else.

This is likely the agent who will also tack on a broker fee to your policy…in addition to the commission they earn for issuing the policy to begin with.

As always, it is recommended that you shop for insurance both online and offline. This means gathering insurance quotes from websites like ours and elsewhere.

And also speaking to one or two independent insurance agents, who can shop your rate and provide you with multiple insurance quotes all at once, all for free!

Note that a captive insurance agent can only provide you with quotes from the one company they represent, which certainly doesn’t count as shopping around, at least not to us.

Read more: Are online insurance quotes accurate?

Insurance Q&A: “Is insurance paid monthly or yearly?”

The short answer is “both.” Just like anything else you pay for, the purchase and payment of an insurance policy can be completed in various ways. The specifics are too many to detail in this post, but we’ll go over the basics to get your question answered.

You Choose

Personal lines insurance policies, such as auto and homeowners insurance, typically come with multiple payment options based on the length of the policy, which could be one month, six or 12 months.

These include various down payment and installment options, as well as paying the whole darn thing in full (which is what the insurance company prefers).

For health insurance, you typically pay a monthly premium, while auto and other lines can be paid monthly, bi-annually, or once a year.

When your policy is being issued, you’ll be asked (by most standard carriers) how you want to make the down payment and pay the installments, assuming you don’t pay in full. Every company is different, but most do it this way.

The down payment and installment plans vary by the type of insurer you are purchasing coverage from and the “line” (personal or commercial insurance).

If you are dealing with the top, standard insurers, you’ll likely get more options. On the other hand, if you are seeking non-standard auto or home insurance, your options may be somewhat limited.

Remember, insurance is a financial product. As a result, how you’ve handled your finances in the past will have a direct result on how much “leeway” your insurer will offer in the form of collecting insurance premium dollars.

Down Payment & Installment Options

The down payment, which is typically necessary to issue the policy, can be paid with a credit card, electronic check (provide you account numbers directly over the internet), cash or paper check at the agency (not too common anymore), or in some cases you may be billed by mail for your down payment.

Don’t expect to get by with no down payment if your insurance score is less than perfect. In fact, some insurers will require a bigger down payment if that is the case.

Progressive, for example, offers several down payment options, which affect how many installments are required to completely pay the policy.

There are really two options here. They are referred to as “direct bill” and “EFT,” which is short for electronic funds transfer.

Direct Bill - simply refers to bill by mail. You get a paper bill in the mail, which has a due date for the premium payment. You simply mail a check back for the premium amount or, in many cases nowadays, you can go to the insurer’s website and make an electronic payment (on any day you wish, as long as it’s before the due date). Any payments processed after the due date will likely be assessed a late fee.

Worst case scenario here is that your coverage may lapse if you make a payment too late. Then you run the risk of being uninsured until your policy is reinstated – which may carry a hefty $25 fee!

EFT - These are payments swept from a registered credit card or checking account on a pre-determined basis. Could be each month, quarterly, semi-annually or annually. Insurers like this program because they don’t have to “wait” for payment and they know right away if you’ve got the money in the account.

Premium Finance – this is typically reserved for commercial insurance policies in which the insurer doesn’t offer payment plans other than paid-in-full. If you can’t pay the policy in full at inception, you’ll have to secure a premium finance agreement with a lender who will pay the policy in full and accept installments from you…with interest of course.

Which Option is Cheapest?

As alluded to above, insurers have a preference as to how they would like you to pay for your policy. They make it clear by how they adjust your insurance costs based on which plan you choose.

If you pay by EFT, the insurer will usually waive the installment fees, which range from as little as $3 per installment all the way up to $15 per installment. The average monthly installment fee is probably about $5 though. But your policy could still be more expensive than paying in full.

Direct billing by snail mail will cost you the most in the long run. You will lose any discounts for paid-in full or EFT installments and may be subject to installment fees. Also, you run the risk of missing a payment and having your coverage lapse.

Tip: It will always be a better deal to pay the policy in full, as you avoid any installment costs. Additionally, you may receive a discount for doing so that will range from 5% to as much as 20% in rare cases. The average savings is 10%.