Selling life insurance is a tough way to make a living and an even more difficult way to sustain a lucrative, long-lasting career. However, some industry analysts, like the job site, Monster.com, report agents burning out within a year.
The difficulties facing new life insurance agents are great in number. The pay is usually straight commission. Finding qualified customers yourself is notoriously difficult, and the few leads your company gives you, if any, have usually been contacted by dozens of agents.
- Successful careers in selling life insurance take time and perseverance.
- Life insurance agents are paid in commissions and must find customer leads on their own in a competitive market.
- It can be relatively easy to find jobs selling life insurance.
- Life insurance sales can add up to passive income, as once you sell a policy, you continue to earn a commission on it, providing the owner of the policy pays his or her monthly premiums.
Pros and Cons
On the bright side, selling life insurance offers a few benefits difficult to find in other careers. First, life insurance sales jobs are abundant and easy to find. Second, commission percentages are very high compared to other insurance sales, such as health insurance.
Best of all, life insurance agents get paid commission renewals for as long as a sold policy is in force. This creates a passive income stream.
However, even when you locate a good prospect, the product itself is hard to sell. People are loath to discuss or even acknowledge their own mortality. Moreover, unlike a new car or cellphone, life insurance provides none of the instant gratifications that leads people to make impulse purchases.
Most companies even reimburse you for the cost of obtaining your license but only after you sell a certain amount of premiums.
Difficulty #1: Commission-Based Pay
The majority of life insurance companies classify their agents as independent contractors. They offer neither base salaries nor benefits. This means an agent can work a full week, but if he puts no sales on the books, he goes without a paycheck.
The upside to not being classified as an employee is the company cannot force you to work set hours, you set your own schedule. That said, life insurance sales, particularly during the first few years, requires working a ton of hours if you want any chance at making a decent living.
A few companies offer employee status, which comes with a small base salary and benefits. Agents at these companies are held to rigid production quotas. Miss your monthly sales target more than once or twice and you could be shown the door.
Difficulty #2: Customer Acquisition
Finding qualified life insurance prospects is fraught with difficulty. Even with harnessing the power of the internet, good leads are hard to come by. Lead vendors abound online, but most of their leads are nonexclusive, meaning they get sold to multiple agents.
Exclusive leads, when you can find them, are very high in price. Your close rate, meaning the percentage of leads you actually sell, has to be phenomenal just to break even with exclusive leads. And employers who provide leads almost always make you take a lower commission in return.
For these reasons, many life insurance agents drum up business the old-fashioned way: cold-calling and door-knocking. These methods still work, even in the 21st century, but being a successful insurance agent requires a lot of perseverance and very thick skin.
Difficulty #3: The Sales Process
Even when pitching to the most-qualified prospect, do not assume you have an easy sell. Life insurance is a very difficult product to sell. Simply getting your prospect to acknowledge and discuss the fact he is going to die is a hard first step. When and if you clear that hurdle, your next task is creating urgency so he buys right away.
This is also difficult because the product provides no instant gratification and leaving the appointment without signed paperwork almost always means you have lost that prospect forever. The client may be sincere when he says he will think about it, but chances are he will not give it five minutes of thought after you walk out the door.
On the flip side of all of these difficulties, there are benefits too.
Benefit #1: Job Prospects
Compared to most finance careers, becoming a life insurance agent is easy. No educational requirements exist beyond a high school diploma at most. Some states require you to take a licensing course and pass an exam, but truthfully, these are as easy as a fifth-grade spelling test.
Jobs selling life insurance are everywhere. The online job search sites are full of them. Because most companies offer commission-based pay with no guaranteed income, they have no incentive to limit hiring. They offer jobs to anyone interested and hope a small percentage of hires become productive agents.
Benefit #2: Potential for High Salary
By far, life insurance sales offer the largest commissions in the insurance industry, but it depends on the type of insurance being sold. For example, most auto insurance salespeople earn a percentage of the policy that is purchased. With life insurance, you earn a percentage of the policy when it is sold, and then you get another commission each time it is renewed.
The U.S. Bureau of Labor Statistics reports that insurance sales agents earn a wide range of salaries. The bottom 10% only earn an estimated $28,000 a year, but in the high range (90%) earn $125,000. The median salary comes in at nearly $51,000 a year.
In addition to high commissions, some life insurance companies advance their agents a specific amount of commission based on calculating the agent's earning potential rather than making them take it as earned, but others do not. So, for example, on a $100 per month policy, with a six-month advance, you would receive a check for $600 the day the policy is issued.
The downside occurs if the policy lapses within the first six months; if that happens, your employer charges back the unearned portion of your advance.
Benefit #3: Renewal Commissions
The commission you earn on a life insurance policy sale is not limited to the first year. Rather, you keep getting paid as long as the policy is in force. Your commission percentage on a policy drops after the first year, but you keep earning 5% to 10% as long as the policyholder pays his monthly premium. This is the passive income you receive each month without even having to get out of bed.
Most life insurance agents do not last a year in the business, and even fewer make it five years. The ones who persevere, however, are rewarded immensely with renewal commissions.