Each insurance company has a commission plan for their respective agents or brokers. It usually has a direct relationship with how many policies an individual is selling at any given time. More than the number of policies, the type of insurance policies or plans affects the rate in such commissions. In order to further understand how arrangements work when it comes to insurance commissions, it is essential to get acquainted with the various kinds of life insurance. The most basic kinds life insurances policies are recognized as Term or Whole Life insurance and Universal or Cash-Value Life insurance.

The principal feature that separates these kinds of policies is that Whole Life insurance lasts for a certain term, hence it is also known as Term Life. For instance, you can apply for coverage that will last 10 to 30 years. If you opt to arrange for lifetime coverage, it is also possible to do so. In Cash-Value Life insurance money from payments or premiums grows interest. In majority of cases, your money will be invested by insurance carriers. However, bear in mind that this is not as profitable as it looks. Often, there are many hidden fees. The other option of getting lifetime coverage may sound appealing to most, but the reality is that it more expensive compared to the latter. Generally, when individuals reach their senior years, they no longer need the coverage of a life insurance plan. For a large number of people, term life insurance would be sufficient.

Commissions vary based on the kind of insurance policy that an agent or broker was able to sell. Each insurance carrier has its own rate but on average, agents can earn between 30-50% on commissions by selling a term life insurance plan. For the sale of a whole life insurance plan, it can be several times higher. Ninety to ninety-five percent could be earned for this type of pre-need product. These commissions are derived from percentage on premiums on the first year of purchase. For the succeeding years, the rates are much lower. The average commission rate for whole life plans is 6%. While for term life insurance plans, the average rate is around 4% per annum. It is also possible to receive a one-time bonus on top of the earnings mentioned earlier. This is how insurance carriers reward their representatives for recruiting new customers.

Let us create a hypothetical situation: Anne is a 32 year old married woman who does not smoke. She has two children that is why she would like to be insured. An agent gave her a quote for both kinds of plans and they both have the value of $200,000. The term insurance option is for 30 years with the premium rate of $25 monthly. On the other hand, the quote for the whole life plan is $150 a month. In this example, it is obvious why most representatives of insurance companies would push for the sale of whole life plans, since for commissions are based on premium percentages.