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What Is Commission on Annuities?

If you are an insurance agent and are considering selling annuities as a way to earn additional income, it’s important that you understand how commissions on annuities work. Selling insurance retirement products may yield significant income, both immediately and in the future, and each carrier offers multiple options regarding payment of compensation to suit your individual needs and goals.

Insurance Agent Compensation

Insurance agents and brokers typically do not earn salaries, but rather receive commissions on the products they sell. Commissions vary based on the products sold, the size of the policies, and multiple other factors, such as the amount of new business generated. Each insurance carrier pays a different commission percentage for their life insurance and annuity products, but overall the average compensation falls within a predictable range across the industry.

Up-Front Commission

Annuity carriers pay agents a percentage of the total money deposited into an annuity account. Certain types of annuity products pay higher commissions than others; fixed annuities typically pay agents between 7 and 10 percent of the total amount invested, and variable annuities typically pay between 5 and 8 percent. Additionally, larger account deposits often qualify agents for higher commissions. As soon as an annuity account is funded by the client, commission checks are generated and remitted to agents at the end of the next pay cycle.

Residual Trails

In addition to up-front commissions, annuities pay agents residual compensation. On the anniversary of an annuity contract, agents receive a small commission usually ranging from one-quarter of 1 percent to 1 percent. Some insurance carriers pay higher residual commissions, and some annuity products pay agents more. Every year, on a contract's anniversary, for as long as that customer keeps the annuity contract in force, the agent receives trail commissions. The more annuities sold, the higher the annual residual income is for that agent.

Commission Payout Options

Most annuity carriers offer agents a choice of compensation options to allow for more customized income planning. Agents may choose a higher up-front commission payout and a smaller residual income that may not begin until the third or fourth contract anniversary, or a lower up-front commission and a larger trail that begins the very next year.

Bonuses and Trips

Nearly every life insurance company and annuity provider offers agents and brokers the opportunity to earn significant bonuses that may come in the form of monetary bonuses or lavish vacations. To motivate agents to sell more products, companies set annual goals regarding the number of new clients, new accounts opened, and new premiums received. Agents who meet or exceed these goals earn bonuses and luxury vacations paid for by the insurance companies as a reward for being a top producer.


Gregory Gambone is senior vice president of a small New Jersey insurance brokerage. His expertise is insurance and employee benefits. He has been writing since 1997. Gambone released his first book, "Financial Planning Basics," in 2007 and continues to work on his next industry publication. He earned a Bachelor of Science in psychology from Fairleigh Dickinson University.