Commission

Feedback

Feedback
Commission is payment taken by a middleman. In financial services, examples of middlemen are insurance brokers, stockbrokers, and mortgage brokers. Commission is usually a percentage of the value of the transaction. If the premium for your insurance is $1,000 and the insurance broker gets 10% commission, she makes $100 from handling it. Note that the insurance broker is not the same as the insurance company. The insurance company actually insures you (takes your premium and pays the claims). The insurance broker is the middleman who handles all the transactions between you and the insurance company. The commission comes out of your $1,000 premium before it gets to the insurance company, so the insurance company actually receives less than the full $1,000 it charged. Stockbrokers usually earn commission on the value of the stocks they buy and sell for you. They typically make it both when you buy and when you sell: if you buy or sell stock for a cost of $2,000 and the commission is 5%, the stockbrokers will earn $100. That commission is payable in addition to the $2,000, so if you are buying stock for a total of $2,000, then the whole transaction actually costs you $2,100. Sometimes they charge a flat fee instead, such as $15 a trade. This is more usual with online Internet trading or day trading. A real estate broker's commission comes out of the selling price: if you use a real estate broker to sell your house for $100,000 and the commission is 6%, the commission is $6,000, so you actually receive $94,000 for your house. That 6% is often split between the real estate broker for the seller and the real estate broker of the buyer.