Life Insurance Agents are making better profit than you How?

Life Insurance agents used to sell for most of us insurance policies to get profit for their livelihood.

But Agents will try to push some policies to us.

Endowment Type of policies also heavily pushed by Agents for us to Buy.

Here, in this article, I am trying to tell you How much profit You will get and at the same time How much your agent is getting?

But Many policyholders are arguing with me that their agents had given them back the commission that they are getting.

Hence they are dreaming that they are smart and made a huge profit in doing so.

Here, I will tell you Whether these policyholders made a profit by taking commission back or not.

What is Life Insurance AGent Commission Pass Back?…

Typical Life Insurance Agent will get a 35% 1st-year commission on the premium that you pay.

In addition, your agent will get a 5% commission on the premium that you will pay from 2nd year onwards till your policy matures. ( it may vary a little from company to company).

But You people ( policyholders) will demand some portion of the commission to be paid back.

As a result of this, these agents are paying back the commission that they are getting to the policyholders.

Here, These policyholders are thinking they have done a wise thing and made a huge profit by getting a pass back of commission from the agents.

Moreover, Policyholders will tell me that they not only got passback of 1st-year commission they also made agents pay major part 1st-year premium from agent’s pocket.

Please do not tell me silly answers that you need agent service for premium paying and in case of death.

Here, in this article, I will try to tell whether the policyholders really got benefitted by getting passback of premium ( Commission ) from Life Insurance Agent.


In addition, Different Agents will get different profit as they give different amounts as pass back of commission.

As a result of this their return “%” will vary.

Now, Let’s see different Scenarios as shown below.

Scenario 1) How much is the return that Life Insurance Agent will make?..

Some Life Insurance Agents will give pass back of their 1st-year commission as pass back to the policyholder.

Let’s assume that You opted for a Life Insurance policy having 20 years premium paying term and the premium is Rs.1,00,000 per year.

In the above case, the Agent actually will get Rs.35,000 as 1st-year commission.

If the agent gives pass back to you this Rs.35,000,  In this case, let’s calculate that How much return that he makes after giving This Rs.35,000 as pass back.


99% return or profit to Life Insurance agent...
99% return to life insurance agent.

If you see the above image, I have taken Cash Flow Rs.-5,000.


Here, I have assumed that the agent has given back to you Rs.35,000 that he gets on the 1st-year premium.

In addition, the agent has spent only Rs.5,000 from his pocket.

But the agent has given away Rs.35,000 (1st-year commission) only which is not from the agent’s pocket.

I.e Rs.5,000 from his pocket and took Rs.35,000 from your premium payment as commission and this commission Rs.35,000 he passed back to you.

So, this Rs.35,000 we can not consider as expenditure for Life Insurance Agent for calculating his return from your Life Insurance premium payment.


As a result of this, I can not enter that Rs.35,000 cash flow for calculation purposes.

In addition, I have also assumed that the agent has spent Rs.5,000 traveling a few times to meet and to complete the policy proceedings.

If you see at the bottom of the above image, It is very clearly visible that age got a return of 99% return on investment.

So, after seeing the above return of life insurance agent, it looks like Life Insurance agents are looting from you.

25 paisa interest to the policyholder and 8 rupees interest to the life insurance agent
25 paisa interest to the policyholder and 8 rupees interest to the life insurance agent

But, Few people ( policyholders) may argue with me that they will get Rs.50,000 as the pass of commission from Life Insurance Agents.

So, Let’s calculate returns for that Scenario also.


Scenario 2) How much is the return of Life Insurance Agent?

In this scenario, I am assuming that the agent has given the pass back 50% ( Rs.50,000 ) to the policyholder, and spent Rs.5,000 for traveling, etc to complete this policy.

Here, the agent has spent only Rs.20,000 from his pocket ( Rs.15,000 towards premium + Rs.5,000 as completing the policy).

Now, let’s calculate the agent’s return in this scenario.


Life insurance agent return is 24%


If you see the above image, The return on investment for the life insurance agent is 24.677%.

Again the above return is also quite good for the agent.

Scenario 3) How much return that Life Insurance Agent gets?…

Let’s Assume in the scenario that the agent gives back Rs.45,000 ( Rs.5,000 as expenses + Rs.40,000 from his pocket ) to the policyholder.

Hence Out of Rs.1,00,000 premium, Rs.75,000 will be paid by the agent and Rs.25,000 will be paid by the policyholder.

But for calculating return we will take R.45,000 only. You can this Rs.45,000 entry in the below image.

9% return for the life insurance agent
agent gets more return than your return.


If you see the above image, Life Insurance Agent got a 9.19% return from the policy you took.

So, after seeing all three scenarios above we found that the life insurance agent is got a return of 99%, 24%, and 9.19% return respectively in different scenarios.

In addition, for the policyholders, it is not important to know how much return that the agent is getting.

How much return that You ( policyholder) is getting from the Endowment type Life Insurance Policies?…

it is very important for the policyholders to know how much return they are getting for themself.

I have written an article about Lic Jeevan Anand return which is an Endowment Policy.

In addition, after reading Jeevan Anand’s article, You will understand that the return that policyholders will get from Endowment Type Life Insurance Policies around 4 to 6% only.

I have written an article about why you should not invest in ULIP of life insurance companies only for maturity is tax-free.

Why I had stopped selling Life Insurance Policies 8 years back?…

When I had stopped selling life insurance policies 8 years back, few people suspected that I have started a new business which gives me more profit.

But that is not the case, If you read the entire article, you may have understood that policyholders not getting enough return which can beat the inflation.

In addition, If you do not take care of inflation. One Day it will make you poor.

Here, you may argue that everyone needs life insurance to safeguard dependants.

Yes, I do agree that you may need life insurance But to protect dependants, Term Life Insurance is the best option.

In addition, This term life insurance also should be taken under need-based analysis only.

Moreover, watch this video to understand need-based analysis for Life Insurance.

But the language spoken in the video is Telugu.


By taking a commission as pass back from the Life Insurance Agent, Do not dream that you have done a wise thing.

As you are considering impact of inflation, your money actually not growing ( maintaining its purchasing power).

In fact, You are becoming poorer day by day.

Hence, I suggest you not take these kinds of endowment types of policies and try to take term life insurance under need-based analysis only.


















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    December 26, 2019 at 4:04 pm


    1. Suda Bhanu Prasad
      December 27, 2019 at 12:40 am

      Thanks for reading this article. Please share my articles.

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