If you are considering becoming an insurance agent, you are setting yourself up for a potentially lucrative and stable career. Not only is the demand for insurance agents high, but even the average insurance agent generally makes enough to sustain themselves. How much an insurance agent can make depends on a number of different factors, but making the right choices for your specific situation could lead to making over six figures. 

Find out how much insurance agents make in 2020 and what steps you can take to increase your earnings.

How Much Do Insurance Agents Make in 2020?

According to the U.S. Bureau of Labor Statistics, an insurance agent makes an average of $50,600 per year as of 2018. The position's pay can vary drastically, with the lowest 10% earning less than $27,500, and the highest 10% earning more than $125,610.

The way that an insurance agent earns their yearly wages differs depending on what company they work for and what type of insurance they are selling. They can earn based on a salary-only model, a salary and commission model, or a salary-plus-bonus model. The commission factor is part of the reason why an insurance agent’s earnings can vary so dramatically. Most independent insurance agents earn their keep on commission alone.

What Factors Determine an Insurance Agent’s Salary?

The average insurance agent salary is not what all individuals in this occupation make. Insurance agents can make anywhere from below the nation’s average salary to six figures. Here are a variety of different factors that can determine their salary.

Type of Agent

Your salary potential differs depending on whether you are a captive agent or an independent agent. Captive agents are tied exclusively to one insurance company’s products. 

Captive agents have the benefit of having the insurance company generate leads for them, as well as a formal office environment working around other agents. However, a captive agent is limited to selling only one insurance company’s policies, making it potentially difficult to achieve a sale. 

Captive agents often earn from commissions, but they may also receive a salary from their insurance company. Many also depend on a seasonal bonus to bolster their yearly earnings. 

Independent agents work for themselves. While they do not benefit from having an insurance company do the marketing for them, they have endless opportunity to grow their business and the ability to sell a variety of policies from multiple insurance carriers. 

Less seasoned insurance agents can benefit greatly from being a captive agent, while someone with more experience in the field may benefit more from being an independent agent. Selecting what kind of insurance agent that you want to be depends on your specific situation and career goals.

Type of Insurance

The type of insurance that you sell helps determine how much you make. Each type of insurance provides its own unique opportunities for attracting new customers and upselling current customers to increase earnings. 

When selling home and auto insurance, an insurance agent can expect to make a percentage of the policy’s premium, as well as a percentage of their policy renewal. This means that having an ever-expanding network of customers could potentially grow your earnings exponentially. 

Life and health insurance policies work under a slightly different pay structure. When a customer first signs up for a policy, the agent makes a large percentage off the sale. The agent also gets income from policy renewal, though at a much cheaper rate. After the third year, many agents stop earning a commission on the policy renewal altogether.

Location

Location is another huge variable in your salary. The cost of living, crime rates, public health status, accident rates, and other local statistics can have a great influence on insurance rates. Ultimately, these local factors affect the size of premiums and thus the insurance agent’s commission. 

An area with a large population may offer more opportunities to find new customers, but it may also provide a higher concentration of agents, making it a more competitive market. It is important to consider your desired salary and lifestyle before deciding where you want to work as an insurance agent.

Commission Structure

The percentage and volume of commissions that you receive can influence your earnings as an insurance agent. 

If you are an independent agent, you can generally earn a much higher percentage of your commission. 

If you are a captive agent, you will receive a smaller percentage of the policy price. The average insurance carrier gives captive agents a 5-10% commission of any policy sold, while the average independent agent makes around 15% commission.

Qualifications

To become an insurance agent, education matters less than formal training. While a bachelor’s degree can be helpful, the position only requires a high school diploma.

As for training, insurance agents must learn through other agents. Many agents beginning their careers will shadow other agents to better understand the position and its requirements. Continuing education is also important, as laws and regulations that influence how insurance policies are structured and sold are constantly changing.

Insurance agents must be licensed by the state that they practice in. Agents may also need to get different licenses to sell different types of insurance. Agents obtain a license by taking and passing state exams around insurance law and ethics.

Payment Outlook

Compared to many other occupations in the U.S., insurance agents have a good payment and employment outlook. The position is expected to grow by 10% by 2028. Position demand is expected to remain steady because insurance companies will always need a way to search for and obtain new customers. This is especially true for independent insurance agents, who insurance companies are beginning to adopt more frequently to cut costs. The position is also impervious to automation for now. In fact, technology actually has helped insurance agents work more efficiently. New technologies such as market automation software have made it easier for insurance agents to obtain new clients, maintain relationships with them over time, and, ultimately, sell more insurance and policy renewals.