Before an insurance company can pay commissions to an agent the agent must be

A. No insurer shall pay directly or indirectly any commission or other valuable consideration to any person for services as an agent or a surplus lines broker within this Commonwealth unless the person is then a duly appointed agent of such insurer and, at the time of the transaction out of which arose the right to such commission or other valuable consideration, held a valid license as an agent, or valid license as a surplus lines broker, for the class of insurance involved.

B. No person other than a duly licensed and appointed agent or a surplus lines broker may accept any such commission or other valuable consideration unless such person, at the time of the transaction out of which arose the right to such commission or other valuable consideration, held a valid license as an agent or surplus lines broker for the class of insurance involved.

C. An agent of a home service insurer who is assigned a debit may receive, and the insurer may pay, commissions on business written on the debit prior to the agent's becoming licensed and appointed, provided that the insurance was sold by a duly licensed and appointed agent, and further provided that the agent receiving the commission is duly licensed and, if appropriate, appointed on the day such commissions are paid to and received by him.

D. This provision shall not prevent the payment or receipt of renewal or other deferred commissions or compensation to or by any person if the person was duly licensed and appointed, where the appointment was necessary, at the time of the transactions out of which arose the right to such renewals or deferred commissions or compensation.

E. This provision shall not prevent the payment of commissions to a trade name which has been filed with the Bureau of Insurance pursuant to subsection E of § 38.2-1822.

F. Except as provided in subdivision B 8 of § 38.2-1821.1, no agent or surplus lines broker shall directly or indirectly share his commissions or other compensation received or to be received by him on account of a transaction under his license with any person not also then licensed under this chapter, for the class of insurance involved in the transactions. No agent or surplus lines broker not then licensed and qualified for the same class of insurance shall receive any commission or other compensation. This provision shall not affect payment of the regular salaries due employees of the licensee.

G. Notwithstanding any contrary provision of law, each insurer shall accept and honor each request by a policyholder for a change of insurance agent of record, which change shall be effective on the date of the next renewal of the policy, unless the policyholder withdraws the request in writing, provided that the change of insurance agent of record shall not be effective unless the proposed new insurance agent of record is a duly appointed agent of the insurer. Prior to the effective date of the change, the insurer shall provide written notice of the change to the current insurance agent of record. The new insurance agent of record shall be paid all commissions payable on the policy effective not later than the next renewal date of the policy following the policyholder's requested change, excluding any commissions or other compensation payable under an insurer's retirement or deferred compensation plan with the insurance agent. A request for a change of insurance agent of record shall be in writing and shall include (a) the policyholder's name and address; (b) the insurer's name and address; (c) the policy number; (d) the name and address of the new insurance agent of record; (e) the date of the request; (f) the signature of the policyholder; and (g) the signature of acceptance by the new insurance agent. This subsection shall not require an insurer to appoint an insurance agent of record, alter an insurer's existing contract with an insurance agent that provides for direct compensation in lieu of commission, or require the payment of full commissions to a new insurance agent where the original writing insurance agent or current insurance agent continues to have responsibility for processing and matters relating to the policyholder. For the purposes of this subsection, "insurance agent" and "insurance agent of record" shall mean only a limited lines property and casualty agent, a property and casualty insurance agent, a personal lines agent, a restricted nonresident property and casualty agent, or a restricted nonresident personal lines agent, as such terms are defined in § 38.2-1800. The provisions of this subsection shall not apply to insurers who provide a process that (i) permits the insured to change the insurance agent of record under terms that are at least as favorable to the insured as the provisions of this subsection and (ii) equitably allocates commissions between the current and new insurance agents.

There are only a small number of industries outside of the financial services industry that offer the potential for relatively inexperienced professionals to make significant income within their first year of employment. And within the financial services industry, there are few careers that offer newcomers the opportunity to earn as much as a life insurance agent does right off the bat. 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 the word "no" far more than they hear the word "yes." And it's not uncommon for the word "no" to be delivered with a fair amount of obscenities and the proverbial door in the face. Additionally, many people hold insurance agents in low regard: Some people even equate them to glorified con artists. But, for those who can stomach the potential rejection, the paycheck and flexibility of being a life insurance agent can be worth the effort.

Key Takeaways

• The career of a life insurance agent is lucrative but involves constant hustling, networking, and many instances of rejection before a sale is ever 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; once hired, you must take a 20-50 hour class and pass a state-administered licensing exam.
• When looking for a job, make sure that you only apply to companies that have received favorable reviews 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 most lucrative career 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" agents, meaning they represent multiple insurance carriers. Either way, the typical insurance agent is going to spend the majority of their 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% to 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% to 10% of each year's premium, also known as "renewals" or "trailing commissions."

2:01

Becoming An Insurance Agent

Let's look at an example of how a life insurance agent earns:

Insurance Sales Commission Example

Uni the insurance agent sells Ryan a whole life insurance policy that covers Ryan for the rest of their life (assuming they continue to make their premium payments). Uni'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 Ryan $100 per month or $1,200 per year. Thus, in the first year, Uni will make a $1,080 commission on selling this life insurance policy ($1,200 x 90%). In all subsequent years, Uni will make $60 in renewals, as long as Ryan 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 20-50 hours.

100%

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.

Getting 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 order to find 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 imperative that you don't feel pressured to take the first position that comes along because 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 insurance rating agencies.

Perhaps the best place to start in deciding where to apply is to visit the insurance company rating websites for AM 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; many agents 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 and make sure you follow the company's instructions on its site. 

Follow up with phone calls on a weekly basis until you hear an answer either way. Many insurance company recruiters will decline to interview a potential agent who doesn't first make a follow-up call; this is considered to be a strong indicator of a potential agent's tenacity. During your interview, continue to communicate your entrepreneurial and "never-say-quit" personality; 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. 

You can 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 more rare. 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 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 a multilevel marketing scheme, have a much higher incidence of complaints than the larger, more established companies.

Accepting a job with the wrong insurance company can potentially burn you out and ruin 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.

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