How do life insurance agencies make their profit?
Agencies make their money from First Year Commissions (FYC) on new policies, and renewal commissions and service fees on policies which have been on the books beyond the first year. If an agent works for an established agency, he/she will get paid a percentage of the total FYC. The total FYC could be anywhere between 40%-120%, depending on the insurance companies the agency represents, and what type of policy is being sold. Health policies pay a lot less than life insurance policies. Of the total FYC, the appointed sub-agent would receive anywhere between 50% and 90%, depending on the sub-agents contract with the agency. Most agencies will pay advance commission on 75% of the sub-agent’s FYC. Example: Let’s say that the sub-agent writes a life insurance policy, and the annualized premium is $1200. ($100.00 per month). Let’s assume that the agency’s FYC is 100%, and the sub-agent’s FTC is 80%. The agency’s FYC would be $1200, and it’s advance would be $900 (75%). The sub’s FYC would be
