Commission
What Does Commission Mean?
In insurance, a commission is a fee, usually a percentage of the premium, that an insurance company pays to an agent in exchange for soliciting and securing insurance applications for the company.
Insuranceopedia Explains Commission
The commission varies based on factors such as the type of plan purchased, the premium amount, the insurance company, and the marketing methods used. For life insurance, commissions typically range from 10% to 25%, while for term and permanent policies, they can range from 25% to 55%. Because permanent policies pay agents a much higher commission than term coverage, the type of policy you choose affects both your long-term costs and the incentives behind a given sales pitch, which is one reason it helps to understand the tradeoffs in term vs. permanent life insurance before signing anything.
Commission rates also vary widely between carriers, so shoppers comparing the best life insurance companies may notice differences in how aggressively certain insurers market through agents versus direct channels. For non-life insurance policies, such as auto insurance, the commission is generally between 8% and 16% of the premium paid by the client. That narrower range means auto agents have less financial reason to steer buyers toward one carrier over another, though rates and claims service still differ a lot between the best car insurance companies.
