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  • Disability insurance

    Not sure if I am going to get a straight answer, but had a fellow talk about disability insurance and sleazy agents. Sent them to this site, but it got me thinking. What is the commission on selling disability insurance? What's the structure? % based?

  • #2




    It depends on what you include in commission. Most non agents would consider it high. It can’t be eliminated or negotiated for the most part so I wouldn’t focus much on it.
    Click to expand...


    Thanks Rex. I was mostly trying to see under the hood - they must be good for insurance agents be so keen in selling to docs and advertising.

    I'll ask couple of agents I know / search some more.

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    • #3
      It's in the range of whole life insurance.

      We have some agents on here who might be able to shed more light.  But the commissions (and thus the profits) are big.

      One of my wife's former colleagues is married to a disability salesman, makes more than his physician wife.  Nothing wrong with that, but there's big margin in disability policies.

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      • #4
        I've not sold insurance, but I've seen approximate figures of the commission on a new policy being equal to approximately the first year's annual premium.  I'm not sure if there are variations between term, whole life, disability.  If the policy is cancelled within 1-5 years there can be various clawbacks.

        I'm more familiar with property & casualty insurance, and commissions can be as high as 15-20% for new business depending on the line, and 5-10% for renewals.

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        • #5
          The commission is generally 50% of the premium for the first year and then 2.5-5% for the next 10 policy years and sometimes for the life of the policy. Like most anything, it can be lucrative for those who have an established practice with volume. It's highly competitive. You are definitely underpaid at first and perhaps overpaid later on. For perspective, my compensation during my training period at a small but busy "private practice" in a HCOL area was a fraction of what the average resident and even intern makes. Perhaps it's different for captive agents at Northwestern Mutual or other captive agencies. One could argue that I'm biased but I feel like the commission is fair, at least for brokers like the person I trained under and myself. We are responsible for our own overhead expenses and there is a lot of work that goes into negotiating with underwriters for the best offer. There is also ongoing policyholder service. There are a limited number of "good" clients just as there are a limited number of patients with high end private health plans.

          Personally I think term life insurance is just as lucrative if not moreso. The commission is 90-120% of the premium. Look at online term life agencies like SelectQuote. There is no disability insurance equivalent of SelectQuote. The underwriting process is easier and quicker with term life. The total time spent on the sale is less.

           

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          • #6
            I'm sorry, I don't understand that logic. Isn't the McDonald's menu a fraction of the cost of a steak dinner at Ruth Chris'? Term life is a much more scalable sale to the average person out there, like McDonald's.

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            • #7




              That’s not a fair comparison though with term.
              Term is also only a fraction of the cost of disability insurance.

              I don’t think one should overly concentrate on commission with disability since it’s non negotiable. Only way to reduce it is some discounts take the discount out of the agents end but again you don’t control that.
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              Thats not my goal. I just wanted to understand commission model. Not doing this for negotiation at all.

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              • #8




                The commission is generally 50% of the premium for the first year and then 2.5-5% for the next 10 policy years and sometimes for the life of the policy. Like most anything, it can be lucrative for those who have an established practice with volume. It’s highly competitive. You are definitely underpaid at first and perhaps overpaid later on. For perspective, my compensation during my training period at a small but busy “private practice” in a HCOL area was a fraction of what the average resident and even intern makes. Perhaps it’s different for captive agents at Northwestern Mutual or other captive agencies. One could argue that I’m biased but I feel like the commission is fair, at least for brokers like the person I trained under and myself. We are responsible for our own overhead expenses and there is a lot of work that goes into negotiating with underwriters for the best offer. There is also ongoing policyholder service. There are a limited number of “good” clients just as there are a limited number of patients with high end private health plans.

                Personally I think term life insurance is just as lucrative if not moreso. The commission is 90-120% of the premium. Look at online term life agencies like SelectQuote. There is no disability insurance equivalent of SelectQuote. The underwriting process is easier and quicker with term life. The total time spent on the sale is less.

                 
                Click to expand...


                Thank you so much for the info. I was genuinely curious and really have no opinions on right/wrong/judging etc. Just interested in different ways the world works I guess.

                 

                Thanks again.

                Comment


                • #9
                  I understand what I know from direct experience. There are way more customers for term life than disability insurance. The sale itself requires less work. It's much more of an assembly line type of sale. An agent doesn't have to be as involved in the process. If you have your own medical practice you know volume is key. Now I don't claim to know the inner workings of a medical practice but I'm guessing there are certain quick billable visits that are preferred even though they pay less than the more complex procedures/visits.

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                  • #10
                    You are hallucinating my intentions. Did I not disclose above how commissions work for disability insurance? Do you know I help people with no reimbursement through PM? I haven't made any statement about whether or not disability commissions are high.  I simply stated that from my own experience, term life insurance can be just as lucrative if not more so than disability insurance and I think disability commissions are fair given the amount of training and niche experience required to adequately fulfill a sale plus the ongoing policyholder service (claims, etc). There are more moving parts and analysis required compared to term life insurance. It's more of a boutique sale and definitely not as scalable to the average consumer. I know because disability insurance companies have been trying to get into the "middle market" instead of just physicians/dentists but have continuously failed. Frankly it's seemingly impossible to have a reasonable discussion with you. I use an analogy to try and find common ground but you attack me for it.
                    Frankly life insurance is more of a time game bc they are almost always in these situations trying to angle you to permanent. I would say 10 times the amount of time was spent on life insurance than disability.

                    You constantly make broad statements such as these with no hard evidence. Where did you publish your study on this? What was your methodology? I enjoy contributing here and sharing my personal experience(s)/thoughts but I start to regret it when my good intentions are mischaracterized by certain personalities.

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                    • #11
                      Rex,

                      You are being unreasonable. Atleast he is helping and responded - you think all these other guys who advertise here and comment are with good intentions ? Give me a break.

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                      • #12
                        Rex, I don't think it's unreasonable for someone to offer up analogies, which is what DK was doing.

                        If in one day he can sell 5 term life policies that each earn him a commission of $150-200 vs selling 1 disability policy that earns him $1500, then yes he'd probably enjoy the commission structure relative to the ease of selling term life over disability. Nothing wrong with that. That's all he was trying to say with his examples. Not sure how that implied he was hiding things.

                        Same principle applies in medicine: it's more lucrative for me in clinic to see two 99213 visits rather than one 99214 in a half hour (if needing to bill based on time, for example). Similarly, anesthesiologists make more for doing a greater number of shorter cases than fewer long cases in a day even if the longer cases pay more per case.

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