An Insurance Agent's Guide to Getting Started with Life Insurance

As an insurance agent, expanding your product offerings to include life insurance can be a lucrative and fulfilling move. The 2024 Insurance Barometer Study reported that approximately 51% of Americans own at least one life insurance policy, with 10% of policyholders feeling like they need more coverage than they have. More importantly, 30% of Americans without coverage report recognizing that they need it, but just haven’t purchased it yet. 

While there appears to be plenty of opportunity in the world of life insurance, diving in can seem complex and daunting. Don't worry, it doesn’t have to be. In this guide, you’ll learn the fundamentals of life insurance, why it should matter to clients, how to overcome common misconceptions, and how to sell and cross-sell it effectively.

What is Life Insurance?

Life insurance is a contract between a policyholder and an insurance company. This contract states that the insurer agrees to pay a designated beneficiary a sum of money (the death benefit) in exchange for premium (usually monthly) payments. Life insurance is designed to provide financial protection to the policyholder's loved ones in the event of their death.

There are two main types of life insurance: term life and permanent life insurance (which includes whole life and universal life policies). But before we get into the types, let's talk about why life insurance matters.

Why Life Insurance Matters

Life insurance is often seen as a safety net. It can replace lost income, cover debt, and help maintain the standard of living for surviving family members. Here are some reasons why life insurance is so essential:

• Income Replacement: For families who rely on the policyholder’s income, life insurance helps replace that income in case of untimely death.
• Debt Coverage: Whether it’s a mortgage, car loan, or credit card, life insurance can help pay off any outstanding debt, preventing a policyholder’s loved ones from inheriting financial burdens.
• Final Expenses: Funeral and burial costs can be substantial. Life insurance helps cover these expenses, ensuring that families don't have to shoulder the financial weight during an already emotional time.
• Education Funding: For parents, life insurance can be a tool to ensure that children’s future education expenses are covered.
• Business Continuity: For business owners, life insurance can provide funding to help with the continuation of the business or cover the buyout of a deceased partner's share.

Types of Life Insurance Policies

Now that we’ve established why life insurance is important, let’s dive into the different types of policies you can offer your clients.

1. Term Life Insurance

Term life insurance is the simplest and most affordable type of life insurance. Unlike permanent life insurance, which provides lifelong coverage, term life insurance offers coverage for a specific period — typically 5, 10, 20, or 30 years. If the policyholder dies during this term, the beneficiaries receive the death benefit. However, if the policyholder outlives the term, no payout is made, and the coverage expires. It can be renewed, but usually for a higher cost.

• Pros: Affordable premiums, straightforward coverage 
• Cons: No cash value, coverage expires after the term

2. Whole Life Insurance

Whole life insurance is a type of permanent life insurance that provides coverage for the policyholder's entire life. Premiums are generally higher than term life policies, but they remain fixed throughout the life of the policy. A key feature of whole life insurance is its cash value component. Part of the premiums go toward building cash value, which grows at an average annual rate of 1% to 3.5% and can be borrowed against or used to pay premiums.

• Pros: Lifetime coverage, cash value accumulation 
• Cons: High premiums, less flexibility compared to term policies

3. Universal Life Insurance

Another type of permanent life insurance, universal policies combine a death benefit with a savings element, which is invested to allow for cash value to build up over time. Premiums are flexible and can vary based on the policyholder’s needs, and the cash value grows based on interest rates.

• Pros: Flexibility, potential for higher cash value growth 
• Cons: Complexity, interest rate risks

4. Variable Life Insurance

Variable life insurance is a type of permanent life insurance that is tied to investments, like bonds and mutual funds. It has fixed premiums and the potential to generate a higher rate of return than other cash value policies. The death benefit is guaranteed, regardless of how the market fluctuates. 

• Pros: Investment opportunities, flexible death benefit 
• Cons: Investment risks, hands-on management, higher premiums

Common Misconceptions About Life Insurance

As an agent, you'll likely encounter several misconceptions about life insurance. Addressing these misconceptions head-on is key to making a sale. Here are some common things you might hear and the truth behind them:

1. "Life insurance is only for older people."

Many people assume life insurance is only for those in their 40s or older. However, purchasing life insurance at a younger age can be far more affordable and beneficial in the long run. A young, healthy person can lock in low premiums for the duration of their policy.

2. "Life insurance is too expensive."

Life insurance is more affordable than many think, especially term policies. In fact, term life insurance is one of the most cost-effective ways someone can ensure that their family is financially protected.

3. "I don’t need life insurance if I don’t have children."

While life insurance is highly recommended for parents with young children, it is also beneficial for singles or couples without children. Life insurance can help cover any outstanding debts and funeral costs, and allow people to leave a legacy or charitable donation.

4. "I don’t need life insurance if I’m healthy."

A healthy individual might assume they don’t need life insurance, but unexpected events can occur at any time. Life insurance helps prepare for the unforeseen, ensuring that families have financial support in case of an emergency.

How to Start Selling Life Insurance

With an understanding of life insurance and the value it can offer clients, you’re that much closer to being ready to sell it. The next step is obtaining a life insurance license so you can legally sell in your state.

Depending on where you live, you might need to complete pre-licensing education requirements and pass the life insurance licensing exam, or you just need to take and pass the exam. The exam tests your knowledge of state laws and regulations pertaining to selling life insurance.

After passing your exam, you’ll need to complete a background check and have your license approved by your state’s insurance department. From there, you’ll be assigned a national producer number (NPN) and can officially sell life insurance. If you plan to sell in multiple states, you will need to obtain licenses in each one.

Cross-Selling Life Insurance with Health Insurance

If you’re already a health insurance agent, you’re familiar with many aspects of insurance. Selling life insurance alongside health insurance can be a strategic way to increase your revenue and offer more comprehensive coverage and value to your clients. Here’s how you can cross-sell effectively:

• Understand Client Needs: During health insurance consultations, assess if the client’s family would be financially protected if something were to happen to them. Life insurance can serve as a complement to health coverage, ensuring that dependents are taken care of.
• Educate & Empower Clients: Take the time to explain how life insurance works, the benefits it offers, and how it can fit into their long-term financial plan. Use easy-to-understand language to explain terms and coverage options, and be sure to personalize your conversation to each client’s needs.
• Bundle Offers: Offering clients a bundle that includes both health and life insurance can provide a holistic approach to their financial security. This can often result in discounts or added value for the client.
• Leverage Technology: Using automation tools can streamline your sales process, allowing you to quickly identify health insurance clients who don’t yet have life insurance coverage, manage policies, and schedule client communications and follow-ups. This enables you to provide better service and close sales more efficiently.
• Build Trust: Selling life insurance is about building long-term relationships. Be transparent, honest, and responsive to your clients’ needs and concerns. The trust you build will result in referrals and repeat business.

Start Selling Life Insurance With Ease

Selling life insurance is not just about securing policies; it’s about offering your clients peace of mind and a financial safety net. Understanding the different types of life insurance, addressing common misconceptions, and cross-selling it with health insurance plans will help you grow your business and build stronger, more valuable relationships with your clients.

By equipping yourself with knowledge and utilizing the powerful policy management tools in AMS+ to identify opportunities and efficiently monitor policies, you can successfully enter the life insurance market and become a trusted advisor in helping people protect their futures.

Ready to get started? Let’s talk about how AMS+ can make your entry into life insurance sales smoother and more effective.

Posted by Allison Babberl on Tuesday, November 12, 2024 in Life Insurance

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2. selling