How Hard Is a Career Selling Life Insurance?

Selling life insurance is a tough way to make a living and an even more difficult way to sustain a lucrative, long-lasting career. Industry analysts place the burnout rate for first-year life insurance agents at greater than 90%, meaning fewer than one in ten people who embark on a career selling life insurance remain in the business beyond one 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. 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 gratification that leads people to make impulse purchases.

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.

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. (For related reading, see: Want to Sell Life Insurance? Read This First.)

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 they require a lot of perseverance and very thick skin. (For related reading, see: 8 Qualities That Make a Good Insurance Agent.)

Even when pitching to the most-qualified prospect, do not assume you have an easy sale. 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.

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, such as Monster.com and craigslist, 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 becomes productive agents. Most companies even reimburse you for the cost of obtaining your license but only after you sell a certain amount of premiums.

By far, life insurance sales offers the largest commissions in the insurance industry. The typical first-year commission for an auto insurance policy is 10% to 15% of the premium. For health insurance, it's 1% to 7%. Life insurance often pays 100% or more. This means if you sell a policy with a $100 per month premium, you make a total of $1,200 in commission on that policy during the first year. (For related reading, see: What Your Life Insurance Agent Makes—on You.)

In addition to high commissions, some life insurance companies advance their agents six to 12 months of commission on a policy rather than making them take it as earned. On that $100 per month policy, with a six-month advance, you 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.

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 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. There are agents with 20 years in the business who make more than $10,000 per month regardless of whether they sell a single new policy.