It’s the question that might be rattling around your curious brain.
How much life insurance commission is my broker making?
Some people would like to know how much we charge insurers to arrange your policy.
Others couldn’t give a toss.
They’re delighted with our service and understand we don’t work for free; we’ve all got mortgages to pay, mouths to feed, yadda yadda.
But look, we’ve got nothing to hide, so here goes:
Our life insurance commission structure
Life insurance and mortgage protection
Aviva, Irish Life, New Ireland, Royal London and Zurich Life, the big five Irish insurance providers, pay us 100% of the first year’s premiums and then 10% annually for your plan’s term.
They pay a bigger slice of commission in the first year as this is where the bulk of the work is done advising and arranging the policy.
The insurers pay a retainer from year two, so we can continue to be your first point of contact if you ever have questions about your policy or need to amend it.
Income protection
We charge a flat 20% commission annually on income protection.
By the way, that’s our commission structure, I don’t know how other brokers get paid.
Why is more life insurance commission paid in the first year?
Life insurance commissions are paid to us in the first year of the policy because that’s when most of the “work” is done to put it in force.
This means that although you may hold the policy for 20 or 30 years, most of the commission is paid in the first 12 months.
What is churning?
Generally, your life insurance, mortgage protection and income protection should be fit for purpose for at least 5 years before you need to amend them.
But if you switch from one company to another every year, the broker will get paid all over again.
And if they switch you again next year, they will get paid again.
This is known as churning and is pretty much illegal in Ireland.
So watch out if your broker calls you every year to make insignificant changes to your policy just so they can switch you to a new insurer.
That’s not how we do things here because it’s not in your interests to switch insurers every year.
You’ll be a year older, so your premiums will be higher.
There are creative ways to fool someone into thinking they are getting a lower-priced policy, so be wary of anyone trying to “shop around” your life insurance.
If you are being advised to reduce your cover, or remove some benefits or buy cover over a shorter term – alarm bells should ring.
Over to you
I hope this explains how Hannah, John and I pay for our private yachts!
If you’d like to work with us and need some help figuring out what you need, please complete this questionnaire, and I’ll be right back.
Thanks for reading
Nick
