Is Your Insurance Agent Working for You or Their Commission?
Getting to know your insurance agent can help you realize if they really have your best interests in mind. You may be surprised to find out how your agent chooses the insurer they place your coverage with. Often times, the insurer offering the lowest rate and best coverage for your individual policy may not be the same insurer that is offering a year-end bonus to your agent for hitting his or her production goals.
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Jeff Root
Licensed Insurance Agent
Jeff is a well-known speaker and expert in life insurance and financial planning. He has spoken at top insurance conferences around the U.S., including the InsuranceNewsNet Super Conference, the 8% Nation Insurance Wealth Conference, and the Digital Life Insurance Agent Mastermind. He has been featured and quoted in Nerdwallet, Bloomberg, Forbes, U.S. News & Money, USA Today, and other leading...
Licensed Insurance Agent
UPDATED: Sep 14, 2023
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Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We are not affiliated with any one insurance provider and cannot guarantee quotes from any single provider. Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance related. We update our site regularly, and all content is reviewed by life insurance experts.
UPDATED: Sep 14, 2023
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We are not affiliated with any one insurance provider and cannot guarantee quotes from any single provider. Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
Every day, scores of consumers visit local insurance agents, putting their trust in them in the hopes of saving some hard-earned money.
What they ask is simple. Find the lowest rate with the best coverage. Not too difficult, right?
Well, you may be surprised to find out how your agent chooses the insurer they place your coverage with. It all starts with how insurance agents make their money.
Get to Know Your Insurance Agent
- Captive agents don’t have much wiggle room since they work with just one company
- Independent agents can shop with multiple companies at once
- But be sure they’re actually doing their job
- And not just placing you with the insurers that pay them the most commission
If your agent is a captive agent, like State Farm, Allstate, or Farmers, they don’t have many options. (For more information, read our “Independent Agent vs. Captive Agent“).
They write your insurance policy with the company they work for and get their commission. It’s pretty simple, as the agent doesn’t have any choices other than their own company’s offerings. (For more information, read our “Types of Insurance Agents“).
So, how much money does an agent make for selling you a policy; usually somewhere between 15% and 20% of your policy premium.
If your policy costs $500, they get $100 when you sign on the dotted line. Don’t forget, they get paid when your policy renews as well, but I will cover that later.
It gets a little trickier when you use an independent agent, who may represent several companies that don’t sell directly to the public.
These agents can “shop” your rate with an unlimited number of insurers to make sure you get the best deal.
But this is where the disconnect between serving your best interests and theirs may become a bit of a problem for your checking account.
In order for independent agents to be able to sell insurance for multiple companies, they must make volume commitments to those insurers.
For example, an agent may promise to write $500,000 worth of insurance per year with Insurer A to ensure that company does business with him or her.
Similar commitments must be made to Insurer B, Insurer C; and so on…you get the picture. Obviously, this situation can put the agent at odds with your best interests.
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Are They Committed to You or an Insurance Company?
- Your agent might be trying to hit a volume bonus
- Instead of shopping your rate with all of their insurance partners
- That could wind up costing you more money in premium
- Make sure your agent is working in your best interest or tell them you’re going to shop agents too!
Imagine this: Insurer A has only received half of what was promised to them this year because their rates are too high in the agent’s area of business.
The agent may want to keep the insurer happy and simply start writing policies with them, regardless of whether it’s the best coverage for you.
After all, the agent stands to lose more business by dropping the contract with the insurer than by placing a few policies with them if you are none the wiser.
But wait, it can get ever more complicated than that.
Your agent is paid a percentage of your overall premium when he or she places your policy with an insurer. We’ve got that so far.
What we need to be sure of is that the agent is actually quoting us with all of the insurers they represent.
Insurers often pay different commission percentages to agents, so you may only receive offers from the highest-paying insurers.
In addition, your agent may be part of a profit sharing agreement with an insurer, or may get “a little extra” bonus for each policy they write with a particular insurer.
All of these situations may work against you as the insurance purchaser, because they tend to skew the agent’s priorities.
Often times, the insurer offering the lowest rate and best coverage for your individual policy may not be the same insurer that is offering a year-end bonus to your agent for hitting his or her production goals.
Read more: 10 Ways to Lower Your Car Insurance Premium
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
Jeff Root
Licensed Insurance Agent
Jeff is a well-known speaker and expert in life insurance and financial planning. He has spoken at top insurance conferences around the U.S., including the InsuranceNewsNet Super Conference, the 8% Nation Insurance Wealth Conference, and the Digital Life Insurance Agent Mastermind. He has been featured and quoted in Nerdwallet, Bloomberg, Forbes, U.S. News & Money, USA Today, and other leading...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance related. We update our site regularly, and all content is reviewed by life insurance experts.