It can be a really rewarding job, and it’s flexible, allowing you to set your own hours. Working as a life insurance agent isn’t for everyone, but getting started is not too complex. You’ll need to be licensed and pass an exam to demonstrate your knowledge of the industry and life insurance products. There are plenty of resources to help you study and pass your test, and no previous experience is required.
So, if you’re interested in working in insurance and helping others, there are a few steps to help you learn how to become an independent insurance agent.
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Two Types of Life Insurance Agents
Generally, there are two categories to choose from when considering becoming a life insurance agent. Those are: a captive agent or an independent agent.
A captive agent is someone who generally represents one life insurance company or carrier. For example, a captive agent with New York Life would only be able to recommend and set up policies for New York Life’s insurance products only.
Meanwhile, an independent agent is someone who can work with several different life insurance companies. Independent agents have a broader range of life insurance products they can recommend to clients, allowing them to serve their needs and interests better.
For the sake of this article, we’ll discuss how to become an independent insurance agent for life insurance.
What Exactly Does a Life Insurance Agent Do?
Life insurance agents help people set up life insurance policies. They meet with clients to learn more about their situations and needs. From there, they use their expertise to recommend specific life insurance options and walk them through the process of getting set up.
A life insurance agent helps their client apply for coverage and start the policy. The agent will help set this up for the client if a medical exam is required. It’s also an agent’s job to help clients narrow down the best premium prices for their clients.
This is where being an independent life insurance agent can come in handy. Independent agents can lay out every option they feel might be right for their clients. They are not limited to just one insurance company’s policies, eligibility requirements, or prices.
Independent agents are also often required to find their own leads, promote their services, and book appointments with clients. Over time, agents might follow up with clients to see if they need to make any changes to their existing policy or add a policy. If you’re highly motivated, organized, and enjoy working with people, you already have some important skills and characteristics that will help you as a life insurance agent.
How Much Do Life Insurance Agents Make?
How much a life insurance agent makes can vary. According to Zip Recruiter, some of the best states to work in life insurance include New York, Vermont, New Hampshire, and Maine. On average, agents earn around $40 per hour or $80,000 per year.
A big part of earnings for agents is commissions which give you 40% to 90% of the annual premium for the first year. Let’s say you sell a 20-year term life insurance policy to a client, and they pay $25 per month. The annual premium amount would be $300 (25 x 12 months), so if your commission rate were 90%, you would make $270 from that sale (300 x 0.90).
If your client has a policy and they keep it the following year, and beyond, you’ll earn what’s called a renewal commission which is pretty much passive income. The renewal commission often equals 3% to 10% of the annual policy premium amount.
This means the more policies you sell and the more clients that keep up with their policy year after year, the more you’ll earn. Also, certain policies pay a higher commission rate than others.
For example, a permanent or whole life insurance policy is more expensive and complex than a term policy. If your client buys a whole life insurance policy vs. a term, your commission could be higher. That said, it’s always important to make sure you’re selling your client the policy that will be best for them and that they understand how it works. Life insurance is regulated on the state level, and it’s important to be ethical with any business.
You can work part-time or full-time as an agent, and it may take some time to build your clientele and income up once you get started.
Steps to Become an Independent Insurance Agent
Step 1: Determine Which Type of Agent You’d Like to Be
Choose whether you’d like to be a captive or an independent agent. It’s completely up to you which option would work better. Being an independent agent would just mean your pool of life insurance options for customers is bigger.
Some people are more focused on saving money, while others want a very specific type of policy.
Also, consider that there are 4 main types of life insurance:
- Term life
- Whole life
- Final expense
- Universal life
While it’s helpful to learn about all types of life insurance, you may favor working with one over the other, so consider this.
Step 2: Find Out Your State Requirements
The basic requirements for becoming a life insurance agent vary per state. In general, you’ll need to be at least 18 years old, pass a background check, finish pre-licensing education, and pass a state insurance licensing exam.
The fees to get started will vary per state. The application fee will be between $40-$200, you’ll also need to do a background check to get started which is around $50. The best way to find out your state’s requirements is by visiting their respective Department of Insurance website.
When you get licensed, you’ll be able to work in the state where you took your test, but you can get licensed in other states for an additional fee.
Step 3: Register and Study For Your State’s Licensing Test
If you have a timeline in mind, it may make sense to register for your state’s licensing test a few weeks in advance. However, you can always do this after you’ve studied the necessary material and understand it well.
Also, to take the test, you’ll need to complete a certain number of training hours, including a pre-licensing study course. Some life insurance agents study health insurance as well. Partnering these two together gives the agent additional ways to help clients get their needed coverage.
The pre-licensing course is usually a one-time class session that lasts a few hours but can be in person or online. This class is an important resource to help you learn what will be on the licensing exam, go through your study guide, and ask questions.
Step 4: Pass the Test and Get Your License
The life insurance licensing test format will include multiple choice, essay, and even fill-in-the-blank questions. Registration for this test can either be done online or on the phone.
The actual test must be taken in person at an official testing center. Some states won’t allow you to do the test independently but require license applicants to be sponsored by an employer. Most states require a 70% or higher score to be considered passed.
If you do not meet the minimum score on your first attempt, you may be able to try again without paying a fee to retake the test. You can, however, take the test numerous times until you pass, but you may have to wait 10 to 30 days between attempts depending on your state.
Once you pass the test, pat yourself on the back and reward yourself. You will now be able to start selling life insurance legally.
Step 5: Get Appointed to Sell Life Insurance
Once you get licensed, and usually before you start marketing to clients, you’ll need to get appointed to sell life insurance. An ‘appointment’ is basically when a life insurance company (also known as an insurance carrier) gives you permission to sell their product(s) and act on their behalf to serve your clients.
To start, you can choose well-established life insurance carriers and offer people a wide range of options. Just go to the carrier’s website to learn more about getting appointed with them and their commission structure.
As time goes on and your clientele grows, you can add more appointments with carriers that offer more niche products for a specific person. Keep in mind that some carriers have specific requirements or quotas that life insurance agents must meet.
Now That You Know How to Become an Independent Insurance Agent..
Becoming a life insurance agent takes effort but could be well worth it if you’re highly motivated. Getting licensed and appointed are just the first steps, though. From there, you’ll want to market yourself and get connected with a group of other agents for support.
Also, continuing your education and attending industry conferences are great ways to grow your skills and gain more success in this career.
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