All About Life Insurance Agents and Commissions

Feb 09, 2024 By Susan Kelly

Outside the financial services business, there are just a few fields where novice workers can reasonably expect to earn a six-figure salary in their first year on the job. Also, being a life insurance agent is one of the few entry-level jobs in the financial services sector that may immediately provide a comfortable living wage.

And many individuals think of insurance agents as little more than a glorified con game. However, those who are resilient in the face of rejection may find that selling life insurance is a good career choice due to the income and freedom it provides.

Despite the potential rewards, a life insurance salesperson requires constant hustle, networking, and dealing with rejection when making a sale. Although some states provide their new life insurance agents with a base wage, most of their income comes from commissions.

Job-seekers should limit their applications to firms that have been given high marks by respected rating organizations like Moody's and Standard & Poor.

Insurance: A Survey of the Industry

There are many types of insurance (from vehicles to medical insurance), but selling life insurance is the most lucrative. Insurance agents specializing in death benefits advise clients on mitigating the financial impact of a death in the family or at work.

Either "captive" or "non-captive" insurance agents sell this form of coverage, depending on whether or not they represent various insurance companies. Either way, most of an insurance agent's time will be spent on marketing to find potential customers who need insurance, provide them with estimates from the firms they represent, and ultimately get them to sign a policy.

Depending on the company, a life insurance agent can make anywhere from 30 percent to 90 percent of the premium a client pays in the first year. "Renewals" or "trailing commissions," delivered to the agent each year after the initial one, can range from 3 percent to 10 percent of the annual premium.

Commission Sample for Insurance Sales

Ryan purchases a policy from insurance broker Uni that will pay out for the rest of Ryan's life (assuming they continue to make their premium payments). The commission structure for whole-life policies sold by Uni's insurance firm is 90% in the first year and 5% in subsequent years.

Ryan will spend $1,200 yearly on the insurance policy, or $100 a month. Therefore, Uni will earn $1,080 in the first year ($1,200 x 90%) from selling this life insurance policy. Assuming Ryan maintains payment of the annual $1,200 in premiums, Uni will earn $60 in yearly renewals. At this commission rate, a new insurance agent may make between $50,000 and $100,000 in their first year.

Professional Requirements for Life Insurance Salespeople

Not everyone can or should be a life insurance agent. Indeed, a life insurance agent's battling spirit is more important than their degree or experience. They need to be the type of people who get excited by the prospect of a sale and view setbacks as stepping stones on the road to ultimate achievement. People who are more reserved, shy, or anxious in social situations probably shouldn't pursue a profession in life insurance sales.

When it comes to becoming an agent, most life insurance firms only require a certain level of schooling. This fundamental norm is regularly disregarded in favor of the "correct" individuals, even though many prefer those with a college degree. Most major insurance companies have training programs to familiarise new salespeople with the many policies they offer, so expertise in the field is unnecessary.

Although a determined self-starter may need help landing a job as an insurance agent with a reputable firm, state licensing requirements are a necessary but insurmountable barrier between them and their commission checks. Agents must obtain permission to sell insurance from each state individually. Licensing typically necessitates the completion of a 20-50 hour course and the successful completion of an examination administered by the state.

Maintain Constant Contact

After compiling this list, it's time to start researching each business. Fortunately for you, due to the high turnover rate among insurance brokers, most organizations publish their job openings in prominent locations and organize them by region. If you discover a local business that appears to be a good fit for you, submit your application per the company's posted guidelines.

Try calling once a week until you get a response. A good indicator of a prospective insurance agent's perseverance is making a follow-up call after being rejected for an interview. Keep on conveying your "can't-stop-will-not-stop" attitude and entrepreneurial spirit throughout the discussion; they are the two most essential qualities to hiring managers.

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