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Which Is More Profitable, Insurance or Real Estate? Delving Into the Facts and Figures

woman thinking, “Which is more profitable insurance or real estate

When it comes to careers that offer unlimited potential for earnings, real estate and insurance are two of the professions that come to mind for most people. 

Apart from the flexibility and the perk of being your own boss, these careers potentially come with a decent paycheck, even reaching five to six digits every year.

Now, the question is, “Which is more profitable, insurance or real estate?

To get a better understanding of this comparison, let us delve into the facts and figures and determine which path may lead to greater profitability for you!      

How Much Do Real Estate Agents Make in a Year?

To answer the question, “Which is more profitable, insurance or real estate?”, let us first take a look at how much real estate agents make in a year.

According to Indeed, agents in the US have an average annual income of $94,031, which is $6,658 per month. They make their earnings through commissions after successful home sales.

Their income depends on various factors, such as the agent’s experience, the number of homes sold in a year, and brokerage fees. This variability in income potential allows for both entry-level and seasoned agents to thrive in the real estate market.

How Do Real Estate Agent Commissions Work?

Typically, real estate commissions are between 5% and 6% of the final sale price of a home. This amount is evenly split between the buyer’s and seller’s agents.

If you are a dual agent, which means you represent the buyer and the seller, then you get all the commission from the sale.

However, if you work for a broker, then the firm also gets a portion of the commission. Mostly, this percentage depends on the agreement you have with them.

To better understand how real estate commissions work, let us look at this scenario:

Suppose you’re an agent representing a seller in the sale of a $300,000 home. If the agreed-upon commission rate is 6%, the total commission for the sale would be $18,000.

This amount is typically split equally between the buyer’s and seller’s agents, resulting in $9,000 for each party. However, if you're acting as a dual agent, facilitating both sides of the transaction, you would receive the full $18,000 commission.

If you're affiliated with a brokerage, they may take a portion of your commission as part of your agreement. For instance, if your brokerage agreement stipulates a 30% split, you would retain $6,300 of the $9,000 commission, while the brokerage would receive $2,700.

You can also use a real estate commission calculator to estimate your potential earnings based on different sale prices and commission rates. These calculators provide valuable insights into how adjustments in pricing or commission percentages can impact your bottom line.       

What Type of Real Estate Is the Most Profitable?

According to a report by Time Magazine, two of the most profitable types of real estate are residential and commercial properties. These sectors offer diverse opportunities for you to capitalize on.

Additionally, you can explore other lucrative avenues, such as short-term vacation rentals, Real Estate Investment Trusts (REITs), wholesaling, and house flipping. Each of these niches presents unique advantages and challenges, allowing you to diversify your portfolios and maximize your earning potential.

More Ways Real Estate Agents Make Money

Apart from the commissions, there are also other income streams for real estate agents to explore.

For one, you can earn referral fees by directing clients to other agents or realtors. Secondly, you can leverage the power of digital media by starting a podcast focused on real estate topics. 

Hosting discussions on market updates, home-buying tips, and interviews with industry experts not only adds value to listeners but also provides opportunities for monetization through sponsorships and advertisements.

Lastly, as you gain experience and authority, you can offer training and mentorship programs. You can share your knowledge and expertise with aspiring real estate professionals while generating additional income streams.  

How Much Do Insurance Agents Make in a Year?

So, how about being an insurance agent?

Again, according to Indeed, the average annual salary of these professionals in the US is $67,139, which is $5,595 per month. This figure varies depending on factors, such as experience, the type of insurance sold, and the individual agent's sales performance.

How Are Insurance Agents Paid?

Like real estate agents, insurance agents also make money through the commissions they get from selling insurance products. As mentioned, these commissions can vary greatly depending on the type of insurance they sell.

For example, car and home policies earn agents about 5% to 10% of the entire premiums. For life insurance, commissions are generally more attractive, which can range between 40% and 120% of a policy’s premiums during the first year.

Health insurance has somewhat similar commission rates as car and home policies, which range between 5% and 10% of the policy’s total first-year premiums.

Other Ways Insurance Agents Make Money

Apart from the commissions they receive, insurance agents also make money through basic salary and profit sharing.

Salaried insurance agents earn a pre-determined amount agreed upon with the insurer or their agency for the given year. However, their performance is still contingent on their ability to sell policies.

Also, some insurance companies offer profit-sharing programs for partner agencies. When these agencies meet specific revenue targets, insurers typically reward them with a percentage of either written or earned premiums as a bonus.

These additional income streams provide insurance agents with opportunities to bolster their earnings beyond commission-based compensation.

The Verdict

real estate agent making good money from closing property deals

 So, who makes more money: real estate agent or insurance agent? Based on the explanations above, it’s easy to see that real estate agents generally have higher earning potential compared to insurance agents.

With an average annual income of $94,031, real estate agents out-earn their counterparts in the insurance industry, whose average annual salary stands at $67,139.

Furthermore, real estate agents benefit from diverse revenue streams, including commissions from property sales, referral fees, podcast monetization, and training programs. 

In contrast, insurance agents primarily rely on commissions from policy sales, supplemented by basic salary and profit-sharing arrangements.

The scalability and versatility of income sources in real estate offer agents greater opportunities for financial growth and success in their careers compared to insurance agents.

Interested in Becoming a Real Estate Agent?  

Now that it’s clear which is more profitable, insurance or real estate, take the next step toward a rewarding career. 

With its higher earning potential and diverse income streams, becoming a real estate agent offers greater opportunities to achieve financial success and professional fulfillment. 

Contact us here at Icons of Real Estate, join our community of real estate professionals, and gain access to valuable resources, training, and support to help you thrive in your real estate journey!

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About the Author

Tomás Fonseca is the host of two popular podcasts in the real estate industry, including the Icons of Real Estate Podcast and the Ardor RE Marketing Podcast.

Known for his charismatic hosting style and infectious positivity, Tomás brings his Portuguese charm to all of his interactions, making him a beloved figure in the community. Tomás loves to travel and to deliver high-quality content and valuable insights to his listeners.

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