Insurance Agents - How They Get Their Paycheck?

Regarding the commission payment for the insurance advisors, it doesn't matter if they are captive (working for just one company) or independent (for multiple companies), as all of them get their commission when an insurance policy is activated. If you decide to cooperate with an insurance agent, there are two big advantages for you: you can get the best price on the market, and the advisor will help you to choose the optimum type and amount of coverage for your situation. Of course, the agent receives his/her commission paid from the insurance company. However, there are some misunderstandings brought about by the media and also by customer scepticism. The important points regarding the payment process that are most commonly misunderstood will be explained in the following paragraph.

"If it weren't for the commissions, the life insurance policies could be cheaper." Life insurance policies, whether sold via salaried employees or self-employed brokers, have distribution costs. With the price of the insurance policy, you already pay also the cost of distribution. RBC Insurance, Manulife or other companies using different distribution models for their life insurance policies usually charge the same premiums no matter how the customer buys the product. A $200,000 Term 10 policy from Manulife will be the same price no matter if the policy is purchased via their call centre, website, or an independent advisor. "It is possible to negotiate the life insurance commissions." That is not true, they are not. When you are buying a car or a home, it's not the same. The policy distribution costs already include the commissions that cannot be altered.

"The commissions for Whole Life or Universal Life policies are higher than for Term Life policies." Life insurance commissions are based mostly on the premium of the policy, that means the more expensive the premium, the higher the commission. The initial price of Whole and Universal policies is higher than for Term policies, but these are purchased just once. If a person decides to purchase a Term policy, there are usually more of them necessary during his/her lifetime. Their price increases as the insured gets older. A commission is paid for each new policy, but what is crucial for the customer is that each time he/she purchases a new policy, he/she is also older, so the policy premium is therefore higher. If the applicant's health status has changed, the insurance rate will be also higher or, in some cases, the coverage won't be offered. For the applicants it is really crucial that they understand the difference between all the life insurance policies and that they know which one is the best for them. "Some providers pay better commissions than others." Commission rates can vary slightly from one provider to another, but regarding that insurance commissions are a fixed cost within the policy, this should have no impact on the customer decision. Make sure the broker works with multiple carriers, some brokers, while independent, only work with two or three. We can make sure that you get the best possible price on the market, as our brokers cooperate with 15 different life insurance providers.