Life insurance is one of the most preferred investment option in everybody’s life. If I ask you how do you like to buy an insurance policy in India? I know most people will reply that via agent who might be your relative or neighbor or friend etc. Whether there is a need or not, most people are forced to buy an insurance policy by these agents. Do you know how much money an insurance agent make by selling a policy?
You might be thinking that I am trying to tell something negative about this profession. Actually it was a very good full-time or part-time job till the policies started launching online. I knew my uncle who used to make huge money as an LIC agent. But now a days things has been changed as one can easily buy a policy online even by paying lesser premium.
Does an insurance agent make good money?
In this article I will try to show you how to calculate the commission of an insurance agent in India.
As per Insurance Act, 1938, The insurance companies are allowed to pay a maximum commission of 40 per cent of the first year’s premium, 7.5 per cent of the second year’s premium and 5 per cent from there on. The commission paid is limited to 2 per cent in case of single premium policies. In case of pension plans, the commission is limited to 7.5 per cent of the first year’s premium and 2 per cent there on.
But now a days the structure has changed a bit. Let’s find out what are figures approximately, as I have not found the accurate data in to refer. Based on some other sources I am sharing this.
|Policy Type||Premium Paying Term||Upfront Commission (1st Year)||Trail Commission (2nd & 3rd yr)||Trail Commission (from 4th yr)|
|Endowment / Term Plans||15+ yrs||25% – 35% *||7.5%||5%|
|Endowment / Term Plans||10-14 yrs||20% – 28% *||7.5%||5%|
|Endowment / Term Plans||5-9 yrs||14%||5%||5%|
|Endowment / Term Plans||Single Premium||2%||0%||0%|
|Money Back||15+ yrs||15% – 21% *||10%||5%|
|ULIPs||Regular Premium||20 – 40%||2%||2%|
Here the percentage also vary based on term of that plan. Only an overview of percentage of commission is considered. Besides that a bonus amount of 40% on commission is also payable. Let’s check with an example to find out how much an agent can earn.
Say You have subscribed to a Endowment policy with yearly premium of Rs 1 lacs for 20 year term. In such case your agent can earn an approx Rs 1,25,000/- in next 20 year from your investment. Check out the calculation below:
2nd & 3rd year
Rs 7500 X 2 = Rs 15,000
4th year onward till 20 year
Rs 5000 X 17 = Rs 85,000
So you can now understand the earning potential of this sector as well. In case any data is wrong or changed recently I would request you to update me by simply commenting on this post. The purpose of this article is to spread awareness about insurance agent’s commission structure and earning potential.
This is also a very good income source as one can work as a part-time and make money from the same. Try to become a good insurance adviser rather than just selling policies for the sake of making money.