December 9

As Earned or Advancing Insurance Commissions (Which One Is Best)

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The prospect of starting in the insurance industry is exciting as it is promising. And if you are going into the field of insurance from an hourly or salaried profession, it’s likely that you’ve spent considerable time wondering about how agents generate income.

Insurance agents do get paid. But an agent’s “salary” isn’t really salary per se. In the insurance business, your “salary” comes in the form of commissions.

Your commissions may vary depending on a lot of factors, but primarily on whether you are a captive or an independent agent. Regardless of the type of agent that you are, it’s important to decide on whether you should take advanced or earned commissions at the start of your insurance career.

In this article, TR King Insurance Marketing, a trusted FMO for Medicare supplement insurance, life insurance, and other types of insurance products, will help you learn more about commissions. We will also weigh the pros and cons associated with advanced and earned commissions, to help you go for the commission type that will help you achieve financial stability in this field.


Insurance Commissions: What You Need to Know

As has been noted, compensation in health, disability, life, or Medicare supplement insurance sales is far from that in traditional careers where one receives a paycheck every other week.

Insurance is not a spectator sport. This means you do not receive compensation from simply waiting for the phone to ring or just going through the motions. The compensation you earn will largely be based on the results you get from the time and effort you put forward when selling Medicare supplement insurance or any other type of insurance product.

You’re in charge of creating your own paycheck in the form of commissions. Your commission is the direct result of the amount of dedication you put into your job including the total hours worked, the phone calls made, the time spent learning and applying insurance best practices.

There are many factors that may affect how much money you make as an insurance agent. These factors include the following:

  • 1
    Size of Your Client Base.
  • 2
    Years of Experience.
  • 3
    Whether You are Captive or Independent Agent.
  • 4
    The Number of Companies You Work With.
  • 5
    The Compensation Agreement You Have.
  • 6
    Whether You are Licensed and Appointed To Cross Sell.

The total amount of your commissions can also be based on the type of product you’re selling or the size of the policy, as measured by its annual premium. Products including variable insurance, universal life insurance, and variable universal life insurance typically have the highest profit margins.

Most life insurance companies see whole life insurance as their bread and butter, and agents usually receive a considerable amount in commissions for selling a whole life insurance policy.

Meanwhile, agents usually receive the smallest commission for selling term life insurance policy because as it is the least expensive among life insurance products, it also has small profit margins for the company. It’s unlikely for agents to get rich from selling term life insurance, unless, of course, they are able to sell it in massive quantities.

Are You a Captive or an Independent Agent?

Your commissions will also depend on whether you are a captive or independent agent. Here are the most notable differences between the two:

Captive Insurance Agents

As stated earlier, captive insurance agents work solely for a specific insurance company or agency. They represent their parent company’s products and get their leads from it, too. This solves for captive agents the number one concern for insurance professionals: attracting clients.

Insurance companies or agencies often invest in marketing to generate interest in their brand and generate leads for their agents. This is especially beneficial for new agents who have yet to expand their network of prospective clients or sphere of influence.

One downside to being a captive agent is being tied exclusively to one insurance company or agency. This means that when they can’t sell a policy, they don’t have the ability to offer clients a different product from a different carrier or outside of the ones their agency offers.

How Captive Agents Get Paid

Like other insurance agents, captive agents also make their living off of commissions. Some captive agents may also receive a paid salary to help them build their book of business.

Generally, captive agents receive an initial commission that is much lower, comparatively of the value of what they are able to sell. When a client renews the policy, they may also get to receive recurring commissions. In addition to commissions, captive agents may qualify for performance bonuses.

Independent Insurance Agents

Independent agents have the freedom to offer products from different insurance companies. While they do not have an allegiance to a sole insurance company, they do enter into contracts that give them binding authority to offer policies on behalf of insurance companies. They find leads on their own and represent their customers, as opposed to a parent company.

While independent insurance agents lack the support of a larger carrier, they also don’t have the sometimes excessive rules and rigid conformity usually associated with captive agents. By going out into the community, they are able to expand their network and influence.

As independent agents, they are able to provide personalized service. They can offer different options to clients who tend to shy away from certain brands, as well as shop around to help their clients find the best insurance products for their budget.


Pro Tip: The setback is that independent agents tend to take on a heavier financial burden, they are almost fully reliant on commissions.

How Independent Agents Get Paid

Independent agents primarily earn through commissions. The more clients they serve, the more money they make. And as clients renew every year, independent agents also continue to receive commissions from the policies.

Independent agents are likely to receive larger commissions compared to captive agents.

A captive agent might, for example, make 12% from selling Medicare insurance from their parent company. Meanwhile, an independent agent selling the same product from the same carrier might make 20%. This might seem like an insignificant difference, but if, for instance, you write $500,000 in premiums every year, you get to augment your annual income by $40,000.

Independent agents are also likely to grow their book of business faster than captive agents. This is because they have more freedom to offer personalized service, and they can reach out and engage with more people in the community. While they have little or no base salary, they are also more likely to earn higher commissions.

Like I mentioned at the start of the article, whether you choose to work as a captive or independent insurance agent, another primary consideration is whether you should take advanced or earned commissions.

Advanced Commissions

Without a book of business to support lead generation, it may be difficult to be financially stable at the start of your new insurance career. To receive financial compensation during the first few years of employment, some agents choose to go for advanced commissions.

Advanced commissions subsidize new agents while they build their book of business into a sustainable source of income. They’re meant to provide new agents with a monthly income until they’re able to earn from commissions on a monthly basis.

They’re usually a loan provided by the carrier to the agent, in anticipation of future commissions. Most insurance companies offer advance commissions, but the repayments usually include a small interest.

While advanced commissions can help you stabilize your career at the beginning, remember that they’re more like a loan, as opposed to income. Advances must be paid back, usually, through the future commissions you earn.

You need to be clear about the terms at the onset, as in the event a client cancels a contract, your carrier is likely to charge you back for the unearned amount of your advanced commission.

To avoid chargebacks, many agents who choose the advanced commission route focus on policies with an annual premium that is paid up front. This way around chargebacks, though, can also be a setback, as not every client will want or can afford, an annual premium.

As Earned Commissions

As earned commissions are the commissions you make as you close out on policies. This isn’t the primary option for many insurance agents who are just starting in their career, as it can take some time to build up the business to a livable wage. This is not the ideal way to go for new producers starting out with zero business unless you have prepared financially for it (we recommend this), but it may be a suitable option for industry veterans.

The good part about as earned commissions is, it provides unlimited income potential for the agent. If you choose this route, your commission percentages will be known and upfront for any commercial or personal policy sales, for both new businesses and for renewals.

Many agents also believe that as earned commissions keep them motivated to keep working, while large advanced commissions may lead them into thinking they could put off work for a couple of months or so.


Pro Tip: As earned commission means counting on income that you have already earned – which means you don’t have to worry about giving it back. It also reduces the chance of chargebacks, in the event that the customer fails to keep their policy active.

Once you start making a steady flow of income from as earned commissions, it may be difficult to keep track of the policies on your book of business. It may also take weeks, and sometimes even months before you can receive payments on a policy, which may put you at risk for forgetting hard-earned payouts.

Consider using a software program to assist you with managing your commissions.

It’s also imperative that you partner with the right insurance field marketing organization. A good FMO/IMO will help you keep track of all the policies that you have open. Regardless if you choose the advanced commission or as earned route, partnering with trustworthy life insurance or Medicare FMO such as TR King Insurance Marketing will help you find leads that will eventually lead to commissions for building your business.

On top of that, we also offer agent tools that allow you to offer top-rated products, manage your open policies, speed up contracting, expand your product knowledge, and more.

Key Takeaways In This Article

  • Your “salary” as an insurance agent comes in the form of commissions. Regardless of the type of agent you are, the choice of using advanced commission or going as earned is integral.
  • Use software to help keep track of policies and business revenue. 
  • As Earned - The client pays, you get your commission. You secure a stable income that you can use for growing your business.
  • Advanced Commission – You receive from your carrier several months of payment upfront. Good for agents who have yet to build their book of business. But you may risk a devastating chargeback in the event your customer lapses with their payments. Failure to pay your carrier back within a set period could harm or end your career.

Over to You

We'd love to hear your thoughts in the comments below on:

  1. Which do you prefer, advanced commission or as earned? Why?
  2. Which of the two would you recommend to fellow agents?
  3. Have you had bad experiences with chargebacks?

If you have any questions, please leave a comment below. We will carefully read each one of them. Happy Selling!

About the author 

Matthew King

Matthew King is a co-owner of TR King Insurance Marketing. When he's not creating processes, content, developing training, and implementing digital marketing strategies, he likes to immerse in gaming with his wife and friends.

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