During moments of uncertainty when the road ahead appears challenging and financial resources feel limited, insurance serves as the safety net that cushions you from financial instability and distress. From the explanation above, it may seem obvious why insurance is a vital component of liability planning. However, sometimes, we get so blinded by the lure of financial security that we often overlook the commission component that comes with different types of insurance policies. 

In this write-up, we’ll discuss how you can enhance your financial planning skills by comprehensively understanding the expenses associated with acquiring and maintaining insurance. This knowledge will empower you to make insurance-related choices driven by insights rather than sentiment.

What is a commission on an insurance policy?

Simply put, a commission refers to a payment expressed as a percentage of the premium that an insurance agent receives from an insurance company as compensation for soliciting insurance applications on behalf of the company. The commission varies depending on the type of insurance sold by the agent. 

Individuals need to stay aware of the commission component for effective liability management, as it can significantly influence the cost of the insurance policy being purchased.

Several companies and financial institutions have built commission analyser tools to promote transparency. Financial transparency fosters trust and accountability while aiding in effective financial and retirement planning.

One great platform offering a commission analyser tool is 1 Finance, the same company that has developed a patented financial personality assessment test called the MoneySign®. The tool allows an individual to select from three types of policies may have purchased, namely:

  • Term life insurance: A type of life insurance policy provides coverage for a specified term or duration, such as 10, 20 or more years. It is often chosen for its affordability and straightforward coverage.
  • Endowment life insurance: Unlike term life insurance, endowment life insurance covers the insured’s entire lifetime. It delivers a twofold advantage by providing a guaranteed sum in the case of the policyholder’s untimely demise, or a maturity benefit if the policyholder lives through the term.
  • Health insurance: It is a type of coverage that helps individuals and families manage the cost of medical expenses. It may include a range of healthcare services, including doctor’s visits, hospital stays and prescription of medications. 

The user simply needs to input the premium amount, the frequency of the payments, and the years the premium has been paid. Based on authentic data, the tool presents a visual breakdown of the commission component of the premium paid by an individual. By deriving data from these commission analyser tools, individuals can make the best decisions about the type of insurance they want.  

Furthermore, an individual can also book a consultation with a financial advisor through the certified financial advisory service to gain personalised insights on their insurance-related decisions. 

Before going forward with an insurance policy, it’s highly advisable for an individual to research the commission involved. Individuals can successfully pave their way to a prosperous financial future by making informed decisions about insurance policies.