To ensure brokers act in a client’s best interests, the Canadian Council of Insurance Regulators and the Canadian Insurance Services Regulatory Organizations created the Guidance Conduct of Insurance Business and Fair Treatment of Customers, which brokers are to follow.
How life insurance brokers get paid
How much do life insurance brokers make? There’s no clear-cut answer. Like most jobs, it varies based on a variety of factors. First, insurance brokers are self-employed, so they do not make a standardized salary, and their income depends on the size of their business—even at a brokerage. “On the brokerage side, it’s commission only, so you don’t see salary and pay based on seniority,” says Amar. “That being said, there are some semi-captive agencies out there—where, usually, you can only sell that agency’s products—that will offer a small base salary or some upfront wages, but that does not occur on the brokerage side.” As for the rates for commission, they vary from product to product, so it depends what they’re selling. Commissions can range from 2% to upward to 30%, depending on the type of insurance.
So, when does the company pay the broker and when does a customer pay a broker? The customer doesn’t pay directly; rather, the provider does, once the policy has been medically and financially underwritten and the policyholder pays their first premium, Amar says. “At this point, the insurance provider will release the compensation to the advisor.”
In general, a whole-life policy pays the broker much more than a term policy. For a breakdown of what the commission looks like, LSM Insurance has some great numbers. (For their full chart, including 100 and universal commission rates, visit lsminsurance.ca.)
A good pitch vs. a good policy: How to spot the difference
According to Amar, the best way you, as a customer, can determine this is to ask yourself,“Does this life insurance product address my needs and wants?” If the answer is yes, then the insurance broker has done their job.
And if the broker is following protocols and communicating with you effectively, that’s a good sign, too. “There could be multiple solutions for a particular need or scenario, and the broker will provide options that address those in different ways and show the pros and cons of those choices.”