Commission on high cost policies

Dear Mr. Tan,
How much does a life insurance agent earn by selling the so-called "high cost" life insurance policies, such as whole life or critical illness?

REPLY
It is better to look at the total cost to the customer, as there are three layers which earn commission on the life insurance policies that is sold to the customer. For most whole life or critical illness policy, the total commission paid is 160% of the annual premium.

If you pay $300 a month towards a life insurance policy, the total commission that is deducted from your policy is 160% of $3,600 or a total of $5,760. About two-third of this amount goes to the agent that sells the policy to you. The remaining one third goes to the upper two layers. This amount is taken away over the first three years of the policy.

Some insurance companies operate at lower cost. The commission that is taken away from your policy is less than 160%.