Few industries outside of the financial services industry offer the potential for relatively inexperienced professionals to make significant income within their first year of employment. Within the financial services industry itself, few careers match the opportunity for as quick and large a paycheck as does being a life insurance agent. In fact, a hard-working insurance agent can easily earn more than $100,000 in his or her first year of sales.
But, success as an insurance agent doesn't come without a cost. Insurance agents hear "no" far more than they hear "yes". It's not uncommon for the "no" to come mixed with a fair amount of obscenities and the proverbial door in the face. Additionally, many people hold insurance agents in low regard, with some people equating them to glorified con men. But, for those who can stomach the potential rejection, the paycheck and flexibility are worth the effort.
Overview of the Insurance Field
While there are many kinds of insurance (ranging from auto insurance to health insurance), the best money in the insurance field is for those selling life insurance. Agents focusing on this end of the insurance market help families, businesses, employers, and other parties to protect against a financial loss that occurs when someone dies. (To learn more about insurance, see our Insurance 101 feature.)
Insurance agents selling this type of coverage are either "captive" agents, which means they only sell insurance from one company, or "non-captive", meaning they represent multiple insurance carriers. Either way, the typical insurance agent is going to spend the bulk of his or her time engaging in some type of marketing activities to identify people who might be in need of new or additional insurance coverage, providing them with quotes from the companies they represent and then persuading them to sign the new insurance contract.
Typically, a life insurance agent receives anywhere from 30-90% of the amount paid (also known as the premium) by the client in the first year. In later years, the agent may receive anywhere from 3-10% of each year's premium, also known as "renewals" or "trailing commissions".
Let's look at an example:
|Example - Insurance Sales Commissions
Bob the insurance agent sells Sally a whole life insurance policy that covers her for the rest of her life, as long as she continues to make her premium payments. Bob\'s insurance company pays a 90/5% commission on whole life policies, which means the selling agent receives 90% of the first year premium and 5% of future renewals.
The policy costs Sally $100 per month, or $1,200 per year. Thus, in the first year, Bob will make a $1,080 commission on selling this life insurance policy ($1,200 x 90%). In all subsequent years, Bob will make $60 in renewals as long as Sally continues to pay the premiums ($1,200 x 5%). An agent selling one or two policies per week at this level could make $50,000 to $100,000 in his or her first year as an agent.
Insurance Agent Qualifications
As mentioned before, life insurance is not a profession for the thin-skinned or faint-at-heart. In fact, more than any other factor, including education and experience, life insurance agents must possess a fighting spirit. They must be people who love the thrill of the hunt, the rush of a sale and see rejection as a stepping-stone to eventual success. A career in life insurance sales is not ideal for those who view themselves as introverted, soft-spoken, or afraid of conflict.
The vast majority of life insurance companies have no formal education requirements for becoming an agent. While many prefer college graduates, this general rule is constantly overlooked in favor of the "right" candidates. Previous experience in the insurance industry is not required because most medium and large insurance carriers have internal programs to train their salespeople about the products they're going to sell.
While it may prove easy for a tenacious go-getter to get hired at a reputable insurance company, there is one non-negotiable hurdle that stands between a potential insurance agent and his or her commissions: state licensing. Insurance agents are currently licensed by the individual state or states in which they'll be selling insurance. This generally requires passing a state-administered licensing exam as well as taking a licensing class that typically runs between 25-50 hours.
If you feel like a career in life insurance sales is for you, there are a couple steps to take in finding your first job. First and foremost, you'll need to put together a resume that highlights your entrepreneurial spirit. You'll want to include anything that shows you taking initiative to make things happen, whether it was starting your own business or taking someone else's business to the next level. Life insurance agents have to be driven and have the ability to be self-starters. Resumes that show a track record of that kind of behavior will help you get your foot in the door.
Once you've got your resume polished, you'll want to begin finding positions and applying. It's really important that you don't feel pressured to take the first position that comes along, as working for the wrong company can both burn you out and haunt you for the rest of your insurance career. Ideally, you want to work for a well-known company that has a good reputation among consumers, other agents and the insurance rating agencies.
Perhaps the best place to start in deciding where to apply is to visit the insurance company rating websites for A.M. Best, Moody's, or Standard & Poor's. From here, you'll be able to build a list of companies that have ratings of "A" or higher in your state. These companies will typically offer the most secure products at reasonable prices, with an emphasis on compensating and keeping quality agents.
Keep Plugging Away
Once you've created this list, you should visit your favorite internet search engine and begin looking up each one of these companies. Due to the high turnover rate of insurance agents, most companies prominently post their job listings by geographical area, which makes them easily searchable for you. When you find a company in your area that seems to fit your personality, go ahead and apply for the position as the company instructs on its site.
But don't stop there. Be sure to follow up with regular phone calls on a weekly basis until you hear an answer either way. Many insurance company recruiters won't even interview a potential agent who doesn't first make a follow up call, because this is a strong indicator of a potential agent's tenacity. During your interview, continue to communicate your entrepreneurial and "never say quit" personality, because most managers will hire someone based on these factors over all the others combined.
If you're lucky enough to land the job, you can expect your first 12 months to be spent handing out a lot of business cards and making a lot of phone calls. Your sales manager will be the first to remind you that your only purpose in life is to find potential clients. In fact, they'll be far more interested in how many contacts you're making each week than how well you know their product line. (To learn how to cold call clients, see Cold Call Without Getting The Cold Shoulder and Alternatives To The Cold Call.)
Do expect to struggle financially for the first few months until your first sales and their commissions start rolling in. While some companies offer a salary to keep newbies from starving, this is becoming more and more rare. Many agents are now lucky to be compensated for one to two months of training before being put on a "commission-only" basis.
A Few Warnings
While the life insurance industry promises great rewards for those who are willing to work hard and put up with a good amount of rejection, there are two other pitfalls you need to be aware of. First, you will most likely be expected to market to your friends and family. While that might be tempting and seem like a great idea to get you started, it can also burn a lot of bridges with people you care about.
Second, you should visit your state insurance commissioner's website and check out the complaint history against companies that you're considering working for. What you'll typically find is that insurance companies that maintain less than an "A" rating, as well as those that sell insurance using multilevel marketing, have a much higher incidence of complaints than the larger, more established companies.
In both of these situations, accepting a job with the wrong insurance company will go a long way toward burning you out and ruining your dreams of a promising career. If a career in life insurance sales is something you truly desire, take your time and wait for the right opportunity at the right company. Doing so will maximize your chances of long-term success.
To keep reading about this subject, see Is Insurance Underwriting Right For You?
Investing NewsOver the years, Austin, Texas has lovingly embraced its quirky reputation with the slogan “Keep Austin Weird.” Today, the capital city is attracting several tech startups and investors, making ...
EntrepreneurshipDiscover the backgrounds of some of the most successful Korean entrepreneurs and information about the companies and projects leading to their success.
EntrepreneurshipDiscover the educational backgrounds and entrepreneurial ventures of some of the most successful and well-known African entrepreneurs.
EntrepreneurshipUnderstand what makes Sweden a great place for entrepreneurship. Learn about five successful Swedish entrepreneurs who are making big impacts.
InvestingHere are some ways to turn what you love to do for fun into your job.
EntrepreneurshipUnderstand why so many socially conscious entrepreneurs have come out of Mexico. Learn about the top most successful Mexican entrepreneurs.
InvestingOprah Gail Winfrey is an American media magnate, television and film producer, and talk show host with a net worth of roughly $3 billion.
EntrepreneurshipWhile all small businesses face long odds, these four types are even less likely to succeed.
EntrepreneurshipDiscover three of Germany's most successful entrepreneurs, their respective entrepreneurial fields and the contributions they made to society.
EntrepreneurshipWeigh the pros and cons of each and strike the right balance to retain a top-tier staff and a healthy bottom line for your business.
Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
When a person prorates expenses between personal and business expenses, he is able to capture the maximum amount of tax benefits ... Read Full Answer >>
Contributions to 401(k) plans come from employee salary deferral and employer match dollars. According to the IRS, employees ... Read Full Answer >>
Although it's possible to achieve innovation without research and development and it's possible to conduct research and development ... Read Full Answer >>
The notion of the American Dream influences the U.S. economy because it creates the driving force behind the free enterprise ... Read Full Answer >>
Marginal propensity to save is used in Keynesian macroeconomics to quantify the relationship between changes in income and ... Read Full Answer >>