Frequently Asked Insurance Questions

Question
What's the commission an agent receives when I buy an insurance policy?

Answer
Insurance companies offer different commissions to different agents. The average commission paid to an insurance agency for a commercial auto, property, or liability policy is about 15%. Some companies pay agents 20%.

Workers' compensation policies carry a much lower commission - 5% to 7%. Directors' and officers' insurance commissions range from 7% to 15%. Insurance included in special industry programs may carry a lower commission to the agent, as does excess and surplus lines coverage.

The general trend is to lower commissions (as a percentage of premium) to agencies. Insurers are under pressure to reduce expenses - agents represent a huge percentage of the non-claims expenses of an insurance company.

Individual producers usually receive a percentage of the commission to the agency. For new accounts the agent may get half the agency's commission. When an agent renews a policy he or she may get 15% to 25% of the commission. Every agency has a different plan - some agents are paid a salary, others may be paid exclusively on a commission basis. Programs even vary within agencies.

In addition to commissions, insurance agencies are paid overrides and bonus commissions based on growth and new sales goals. Most insurers pay year-end "contingent bonuses" that are based on total sales volume (with a particular insurer) and claims payouts.

Question
Do insurance agents represent the insurance company or the insurance buyer?

Answer
Well, kind of both. The term "agent" refers to the individual's relationship to the insurance company. The agent is an agent of the insurer. The person from whom you buy your insurance also has an obligation to you, though. It is assumed that they will be open and honest with you about the policies they sell. Most insurance agents work hard to make sure they are doing what is right for their client, the insurance buyer.

Question
My insurance policy expired last week. I have 30 days to decide if I want the coverage, right?

Answer
It depends on your state law. Most insurance companies will accept your policy for flat cancellation (no coverage and no premium) in the first 30 days. If you have a loss, you are locked in. Again, your state law will determine how cancellations are handled.

See our articles page and insurance blog for more information. Site search is also available.

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