Shopping for car insurance typically involves working with an insurance agent. People often wonder how much commission auto insurance agents make when they sign drivers up for a policy. While agents make usually between 5% and 15% commissions, they aren’t ripping off motorists when they encourage full coverage. It’s actually a smart choice to make.
We’ve reviewed major providers across the U.S. to find the best car insurance companies on the market. It’s smart to compare auto insurance quotes from various providers to make sure you’re getting a competitive rate on your next coverage plan.
How Large a Commission Do Auto Insurance Agents Earn?
How much commission auto insurance agents make largely depends on where one works. Rates for car insurance commissions vary from as low as 5% up to a maximum of around 20%.
Independent Agents Earn Higher Commissions
Auto insurance experts almost always have higher commission rates if they work independently than if they’re captive agents, who work for a specific insurance company. Those who are captive agents usually receive company support and a base salary, but lower commissions.
Independent agents are free to work with as many auto insurance carriers as they want if they set up arrangements with each company. They receive less support from each provider but get to keep more of the money made through commissions.
How Much Money Do Insurance Agents Make?
According to the U.S. Bureau of Labor Statistics, the median salary for insurance sales agents was $49,840 per year in 2021. The lowest-paid 10% of workers in the sample earned $29,970 per year while the top 10% earned $126,510 annually.
You’ll notice that the average insurance agent salary covers a broad range. That’s because the average salary depends largely on whether agents are working with major carriers or not and whether they’ve got plenty of new clients and new policies coming through.
There’s also a large variation between the percent commissions given for auto insurance policies, home insurance coverage, health insurance policies and whole life insurance plans. The bottom line received by agents often depends on their type of insurance business.
It’s not necessary to have a bachelor’s degree to become an auto insurance agent, though it may impress business owners when hiring. It’s relatively cheap to start a new business in the insurance industry, though startup costs tend to add up over time.
Insurance Agents May Also Charge Fees
It is also worth noting that some car insurance agents will charge fees on top of the commissions they make. These fees serve a similar purpose but are structured differently.
Insurance agents typically receive slightly lower renewal commissions when drivers sign up again for the same policy. Companies typically keep a book of business with a record of all policies that have been offered, and agents are rewarded for long-term customers.
What Affects Auto Insurance Agents’ Commissions?
There is a great deal of variation in commission rates for agents, even among those who sell auto insurance. Car insurance commission rates largely depend on the factors listed below.
Captive Versus Independent Agents
As previously mentioned, independent insurance agents typically make a much greater amount in commission than captive agents. Most captive agents earn 10% or less in commissions, while independent agents regularly earn 15% or more.
Location of Insurance Agents
Even if the commission rate is the same across state lines, agents in states with extensive minimum coverage requirements will earn more than where it’s easier to find cheap auto insurance. This is a direct result of car insurance commissions being almost always based on percentages.
Risk Factors of the Client
You’re likely to have higher insurance premiums if you’ve got a bad driving record, have had a suspended license or are a teen driver. Thanks to percentage-based commissions, these higher car insurance rates lead to a larger net commission for your agent.
So, insurance agents who specialize in high-risk drivers may find themselves with bigger earnings than those who mainly work with low-risk motorists. This type of insurance agent is more likely to insure difficult drivers, though, and may need to file more disclaimers of coverage.
Chosen Level of Coverage
One of the biggest factors affecting the cost of an insurance policy is the level of coverage chosen. State-required minimum liability coverage will pretty much always be more affordable than full coverage auto insurance.
Because of this, insurance brokers and agents who regularly sell full coverage will make more than those who regularly offer the minimum. The more add-ons that agents can sell, the higher their overall commissions.
It’s worth noting, though, that full coverage car insurance is a solid choice for most drivers. While auto insurance agents make much higher commissions for encouraging extra insurance products, people actually benefit from add-ons such as uninsured motorist coverage along with collision and comprehensive insurance.
How To Use This Knowledge When Buying Auto Insurance
Because of the commission structure, insurance agencies will encourage you to buy policies with higher premiums. They sometimes try to convince drivers to get additional coverage that may not be necessary.
Keep in mind that extras such as roadside assistance, towing coverage and gap insurance may be smart choices for some drivers, but that’s not true across the board. While it’s often a good idea to select medical payments coverage or collision insurance, there are plenty of add-ons that are more questionable in their actual value.
Agents may also recommend bundling health care coverage along with homeowners and auto insurance. While this will likely increase their commission, it also lowers your overall costs. You shouldn’t feel pressured to buy add-ons. Getting a clear idea of how much coverage you need might be helpful before interacting with insurance agents who work off of a commission.
Our Recommendations for Auto Insurance
Based on our research, we suggest reaching out to GEICO, USAA and Progressive for your car insurance needs. Compare multiple auto insurance quotes from these and other providers to discover how little you could pay for quality insurance coverage.
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Drivers turn to GEICO for coverage due to its reasonable rates and relatively strong customer service scores. The company is known for its many coverage types that span everything from mechanical breakdown insurance and rideshare coverage to rental car reimbursement.
USAA: Best Military Provider
USAA is our pick for the Best Military Provider because of its excellent coverage for military members, veterans and their families. In addition to standard auto insurance, USAA offers classic car insurance, rideshare coverage, gap insurance and roadside assistance.
Progressive: Best for High-Risk Drivers
Drivers with speeding tickets, DUI violations and recent accidents may find standout rates from Progressive. The insurer is known for accepting drivers who would be more likely to get rejected by other providers across the insurance industry.
Learn more information about the provider in our Progressive insurance review.
Frequently Asked Questions
Which insurance company gives the best commission?
There is no single insurance company that offers the best commission. Agent commissions depend on the types of policies sold, where plans are purchased and the salesperson’s experience level in the field.
What is the profit for an insurance agent?
Most insurance agents earn commissions of between 5% and 20% for selling auto insurance. Commissions can vary greatly, and captive agents may also have a base salary.
Why do insurance agents earn so much?
Not all insurance agents receive high salaries, but they generally have high potential earnings because their job is commission-based. As such, agents who sell more policies have relatively large possible earnings.
What is the most profitable insurance to sell?
Selling auto coverage can lead to very strong earnings, but life insurance policies are some of the most profitable types of insurance. Life insurance agents receive extremely high commissions based on the first year’s premium.