Brokers Get Paid By the Insurance Companies, Not Their Clients
It’s Always a FREE Service To You
How do brokers get paid for helping you, you may ask…?! You may be thinking… ” how can I know that this is the right choice for me? How do I know that they won’t try to sell me the wrong products?”. Those are all valid questions, and I’ve got some great answers for you! Brokers get paid by the insurance companies directly, for finding them a client and getting them enrolled in a plan. We prospect, find those in need, and then spend the time to educate the clients on their needs and the value of working with certain companies. Once you have decided which company you’d like to work with, and the plan you feel comfortable investing in for your family, then I will enroll you in that company’s plan.
I Do What I Want!
So, what stops me from pushing one company over another? Nothing. Truth is, I can promote any product I want… but I don’t usually favor one company over another. What I do, is listen to each individual person’s story, and then choose the products that are best for that person and their story. The listening comes before the product decisions are made. Now, there’s some companies out there that have products that appeal to almost anyone, so in that sense I do favor certain companies some of the time. But… I NEVER choose a product or service based off of a commission that I will be getting… it just doesn’t happen!
Now how is the commission determined? I’m not going to give percentages, but basically, you calculate broker’s commission off each client like this: You take the monthly premium that client is paying multiply it by 12 months to get the ANNUAL amount spent. Then you take that Annual Value (AV), and then take a percentage of that as the commission. So, say you had a $100/month premium – that’s $1,200 in a year. Then say your broker gets 10% of that AV. He would make $120 off of your $100/month premium. And since there’s always a possibility of a client cancelling before that 12 months is up… agents only get HALF of that up front, and then the second half is held until the first 6 months are over, then they would get 10% of the monthly premium a month until they hit 12 months. So, that would be $120 up front, then $12/month for the second half of the year.
It’s All About the Renewals, Baby!
Brokers also get what they call RENEWALS. Renewals are clients that stay on the books for an additional year after the first year, and beyond for many years to come. So, every additional year beyond the first year a client stays a client… a broker gets an additional “thank you” from the insurance company. It’s very minimal, but they add up over time. The renewals is a big reason why a lot of brokers get into this industry in the first place – It’s the consistent and reliable source of income that’s built up over time. It snowballs drastically, and becomes a very valuable asset. For example, say I sold you a dental policy, where you pay $30/month. Under the same rules as the previous example, I would make $18 up front, and then $3/month for the second six months of the first year. Then, maybe I’ll get a 5% renewal every year – or another $18/year from that client. It doesn’t seem like much, but say you sell a dental policy every other day (180 times/year), then that would be roughly $3,300/year added to your salary going into the future. Then, if you sold another 180 policies the following year, then in the third year it would be $6,600/year added to your salary. See how that works? It just keeps adding up and adding up over time.
Helping People Is the Only Way to Be Successful
Almost every single commission structure that we receive from the various insurance companies we represent, are all basically the exact same percentage commission. Which means that there’s really no incentive to offer one company’s plans over another. One lesson I learned early in my career, was to just simply help the customer, and my income and success in the industry would flourish… and it has! When I first started, I would try to sell people on too much insurance that they didn’t need, and they kept turning me down for insurance and going elsewhere. I never knew why… but it would always upset me. Then, I talked to my supervisor and they said “you’re TRYING to make money… just stop and start simply HELPING people, and the money will come!”. It didn’t make sense at the time, but as I tried that, I found myself with more clients, because I was simply sticking to exactly what they needed and not anything else! Who knew! Just doing the right thing made you the most profitable in the end anyways!
Helping people obtain quality health insurance has been my favorite job of all time. I am grateful for the experiences and support that I have received in this career, and have learned that quality over quantity is a true statement.
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