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, few careers offer newcomers the opportunity to earn so much right off the bat as a life insurance agent. In fact, a hard-working insurance agent can earn more than $100,000 in their first year of sales.
But, success as an insurance agent doesn't come without a cost. It's a tough field and most participants burn out sooner rather than later. 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.
Becoming An Insurance Agent
- The career of a life insurance agent is lucrative but involves constant hustling, networking, and rejection before a sale is made.
- Life insurance agents might be given a small salary to get started but are otherwise primarily dependent on commissions to make a living.
- Finding potential customers is difficult and time-consuming; getting those customers to make a purchase once you track them down is even harder.
- A strong background in sales can get you hired, but once hired, you must take a 25-50 hour class and pass a state-administered licensing exam.
- When looking for a job be sure that you only apply to companies that are well reviewed by rating agencies like Moody's and Standard & Poor's.
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 protect against a financial loss when someone dies.
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 activity to identify people who might be in need of new or additional insurance coverage, providing them with quotes from the companies they represent and persuading them to sign the new insurance contract.
Typically, a life insurance agent receives anywhere from 30%-90% of the amount paid for a policy (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:
Insurance Sales Commission Example
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's 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 commission level could make $50,000 to $100,000 in their first year as an agent.
Life Insurance Agent Qualifications
As mentioned before, a life insurance agent is not a profession for the thin-skinned or faint of 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 their 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 25-50 hours.
The sales commission life insurance agents might earn in the first year if they are on a commission-only salary; that's the highest commission for any type of insurance.
theGetting Hired to Sell Insurance
If you feel like a career in life insurance sales is for you, there are a couple of 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 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 with 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 there, 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.
The work of a life insurance agent is grueling and most don't last more than a year; on the upside, this means that there are constant vacancies and it can be relatively easy to get started as a new hire.
Be Sure to Follow Up
Once you've created this list, begin looking at each company. 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, apply for the position as the company instructs on its site.
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.
Do expect to struggle financially for the first few months until your first sales commissions start rolling in. While some companies offer a salary to keep newbies from starving, this is becoming rarer and rarer. 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 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.
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.