According to industry reports, the average annual pay of an Insurance Agency Owner in the United States is $72,499. This works out at approximately $34.86 an hour, $1,394/week, or $6,042/month. While there are insurance agency owners who earn salaries as high as $128,000, there are some who earn salaries as low as $29,000.
However, note that a good number of Insurance Agency Owner salaries currently fall within $43,000 to $100,000, with top earners making $110,000 annually across the United States.
From the above payment breakdown, it is easy to note that the pay range of an Insurance Agency Owner varies greatly (by as much as $57,000), and this entails that there may be numerous opportunities for increased pay based on skill level, location, and years of experience.
Are Insurance Agencies Profitable?
Profitability can come from sales projections, gross profit estimates, the cost of providing services, and other expenses. Note that the beauty of insurance is that it is a must-have, therefore the demand is always there. As an insurance agency owner, you are mainly tasked with developing new marketing strategies, advancing new types of products to clients, and making changes to existing products within your agency.
There is technically no limit to how much you can pay yourself as an insurance agency owner. While it can be nearly impossible to see salaries above $500,000, note that with distributions, an insurance agency owner could hit $1 million or more.
You can grow your income as you grow your agency. However, beyond salary, you’ll likely owe taxes on annual “pass-through” profits—regardless of whether you take the profits in cash. Several criteria will determine your pay. Factors that will impact owner pay and compensation at independent agencies include;
Factors That Will Impact Owner Pay And Compensation at Insurance Agencies
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Location
Location is one very crucial factor that determines the income of the agency itself. Have it in mind that the cost of living, crime rates, public health conditions, claims, and other local statistics can genuinely influence insurance costs.
These varying geographic characteristics will also influence the number of premiums and, consequently, the commission earned by the agency. And while a well-populated area may boast of an encouraging number of new consumer prospects, it may also have a heavy concentration of other insurance agencies, creating a more competitive market.
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Agency Revenue
In this line of business, the higher the revenue of your agency, the more you can afford to pay yourself as the owner. It doesn’t make business sense to pay yourself $500,000 when the total annual revenue of your insurance agency is $500,000.
Also, note that more revenue doesn’t entail a higher salary or compensation for the owner, this is because some agencies grow unprofitably rather than profitably.
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Type of Insurance
The type of insurance you sell will also influence your income. In the insurance business, every type of insurance provides varying opportunities to attract new customers and sell more. An agency that only sells home and auto insurance can expect to earn a percentage of the policy premium and a portion of the policy renewal.
This entails that having a steadily growing network of consumers will increase your profits too. This is entirely different for an agency that only sells health and life insurance policies or one that sells commercial business insurance.
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Full-time vs. Part-time
According to industry reports, a greater percentage of agency owners work full-time, however, some choose to work part-time. As the owner, you can always decide to work part-full, but you won’t pay yourself 100% of your previous compensation, as some of that money will be used to pay for help.
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Tax Planning
You may be advised by your tax advisor to pay yourself a relatively low salary for tax purposes; however, you must remember there are limits to this strategy. For benchmarking, you should consider “converting” your compensation to a salary-based equivalent to ensure it works out as an apples-to-apples comparison.
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Number of Co-owners
If you have co-owners, then certainly you are the highest-paid people at the agency. Have it in mind that more partners entail more owner compensation, and this means less money to pay non-owner employees. According to experts, insurance agencies spend around 50-60% of their revenue on labor. If you choose to overpay the owners, then you will have little funds available to pay everyone else.
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Personal Preference
Most often, business owners use their lifestyle expectations to determine their income and pay, and this will vary on individual bases. There are agency owners who have a second home, a substantial travel budget, or annual tuition expenses.
It is pertinent to note that these decisions and choices impact the agency’s growth, profits, and quality of life. Agency owners with more recurring revenue will feel more confident about paying themselves a higher salary.
Profit Margin for Insurance Agency Owners
The profit margin of an insurance agency owner will likely depend on the number of premiums the insurance agency writes, its return on investments, business costs, and the amount possibly paid out in claims.
According to industry reports, life insurance businesses had a net profit margin of 4.1% in 2021, property and casualty insurance companies had a net profit margin of 8.7%, while accident and health insurance companies witnessed a net profit margin of 5.53%.
Owing to that, most modern insurance agency owners operate on margins as low as 2% to 3%, and the ratios will vary based on how they choose to run their business. As the owner of an insurance agency, it is advised that you always seek input from your accountant and/or tax advisor on the right way to structure things for your specific agency and situation.