Tuesday, September 8, 2009

Paychecks for insurance agents.

Insurance advisers generally get their commission when an insurance policy is made valid. This goes both for captive advisers, who are paid just by one company, and for independent ones, who work for more different insurance companies. Two pluses of working with a broker are that they can advise you on the optimum type and amount of coverage and they can shop the market for the best premium. Well, we have to remark that it is the insurance company that is paying the agent. Certain misunderstanding has been brought about by the media and consumer skepticism. The following are points usually misunderstood concerning the payment process.

"The price of the life insurance policy is driven up by the commissions." The fact is that life insurance policies have some distribution costs, no matter if they are sold via salaried employees or self-employed advisers. With the price of the insurance policy, you already pay also the cost of distribution. It usually doesn't make any difference how the consumer buys the policy. Some companies, for example RBC Insurance or Manulife, charge the same rates for the same life insurance sold via multiple distribution models. A $200,000 Term 10 policy from Manulife will be the same price whether the policy is bought via their call center, website, or an independent advisor. "It is possible to negotiate the life insurance commissions." That is not true, they are not. The situation is different from when you are buying a car or a house. Once again, the commissions are built into the distribution costs of the policy and cannot be altered.

"Whole Life or Universal Life insurance pay higher commissions than Term Life insurance." Life insurance commissions are based mostly on the price of the policy, that means the higher the premium, the higher the commission. Whole and Universal policies have higher initial premiums than Term policies, but the Whole and Universal policies are bought once. If a person decides to purchase a Term policy, there are usually more of them necessary during his/her lifetime. Their price grows as the insured gets older. Each time a new policy is bought, the agent gets paid the commission, but also the insured person is older each time, so he/she has to pay a higher insurance rate. The insurance premium also depends on the health condition of the applicant - in case it has changed, the premium will increase or the coverage won't be available. It is key that the insured have a keen understanding of how much life insurance they need and how the different life insurance policies work. "Some companies pay better commissions than others." The truth is that the differences between commission rates from different providers are only slight. But anyway, this shouldn't influence the customer's decision, as insurance commissions are a fixed cost within the policy. Make sure the broker works with multiple carriers, some brokers, while independent, only work with two or three. We can ensure that you get the best possible price on the market, as our brokers cooperate with 15 different life insurance providers.

Photo source: escalade328s

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