Do insurance agents make good money?
This is a question often asked especially by those just starting out in the indurstry.
But before I answer that, let me first define the following jargons in the insurance industry.
What is an insurance agent?
Insurance agents basically are licensed representatives of insurance companies or firms and sell — well, insurance policies. This can be medical, car, education, or life. They mainly receive commissions on every sale they close or a fixed monthly salary from the company. They are responsible for explaining the products and the benefits of having one.
You would probably remember this a few years back — 10, 20 years ago. You or your parents were receiving calls or knocking on your door selling insurance. Kind of reminds of the Vault-Tec Representative from Fallout 4, a video game I used to play before (I know, I know he’s a salesman, not an insurance agent, but you see my point, right?).
Anyway, those were the days. These were the tried and tested marketing strategies of insurance agents to get clients. But now that we are in the age where everything is online and is just a click away — plus the effect of the COVID 19 pandemic — insurance agents need to adapt. And fast.
Types of insurance agents
There are two types of agents: independent and captive. When looking for an insurance provider, you may likely come across an independent insurance agent instead of a captive agent because they usually make the first move. Choosing the right insurance agent is crucial as it will help and guide you to utilize your insurance policy. If you are someone looking and shopping around for one, consider these two types before signing up for an insurance policy.
Here are some of the main differences between captive and independent agents:
Captive agents work and represent only one insurance company. They have a good understanding of the insurance provider’s underwriting and limitations. If you are buying insurance for the first time, having a captive agent will be most beneficial because of their in-depth knowledge of their company’s insurance policies. They can point you in the right direction. Lastly, captive insurance agents focus on customer satisfaction. Captive agents have offices provided by the insurance company.
On the other hand, independent agents work with several different insurance companies and give you different options to compare. They are licensed by these companies to provide different quotes for different insurance policies. The independent agent may push you to a specific policy because their commission is based on it. Independent agents also have to rent their own offices since they are not tied up with an exclusive insurance company.
Types of insurance
There are different types of insurance policies out there that you can purchase depending on your needs. Having an insurance policy is somewhat necessary these days because of all the chaos, recessions, rising crime rates, and illnesses that we have worldwide. It’s our safety net. In worst-case scenarios, you want your family and loved ones secured.
Here are the major types of insurances that we think should be on the top of your list:
Life insurance is a must-have type of insurance, especially if you have a family depending on you. A study was made back in 2018 by LIMRA shows that one in three families cannot meet their day-to-day expenses within a month if the primary breadwinner dies. With life insurance policies, this can cover the cost of funeral expenses, college funds, and the principal’s debt.
Medical insurance is a type of insurance that covers your medical expenses, may it be to reimburse you when you pay out of pocket. According to a study from the American Journal, this type of insurance is also a good investment because two out of three whole filed for bankruptcies were contributed by income loss due to illness.
According to statistics, the average annual cost for auto insurance is $1,099.00, and the average cost per bodily injury claim is $15,506.00. What would you want to pay? With the rising deaths and accidents contributed by driving, auto insurance is key to preventing you from any financial loss due to a car accident. This may also cover car theft, bodily injuries, and medical fees incurred during an accident.
Home insurance provides reimbursement in the event of theft, vandalism, or damage to the house. However, Acts of God is a premium, and there are limitations for stolen properties like jewelry.
Do Insurance Agents Make Good Money?
In 2018, the average annual salary of an insurance agent is $50,000. An insurance agent’s salary depends on what kind of insurance agent they are and is also affected by their clientele’ size, plus many other factors. Since independent insurance agents work with several different insurance companies, they earn on a commission basis, unlike captive insurance agents who get a minimal commission but have a monthly salary and allowance.
The main factor is if the customer meets the criteria of the company. This, of course, is subjected to the insurance company’s rules and policies.
There’s a saying that for one approved insurance policy, eight have been declined. So, it really boils down to the factors listed below.
4 Factors that can affect how much an insurance agent can make
Compensation agreement to an employer
If you are an independent insurance agent, this determines how much you can earn depending if you need to meet the quota. Most of the captive insurance agents do not have a monthly quota.
Number of companies’ insurance agents represent
Independent insurance agents get the upper hand when this comes to play. Since they represent several insurance companies, they would be able to get most of the percentage due to the flexibility of the insurance policies they can offer to a client.
Operational expenses (staff, office rent, etc.)
Operational costs for captive insurance agents are usually shouldered by the insurance company, unlike independent insurance agents who would have to fund their operational costs.
Customer acquisition is very difficult and when you do come across leads, you would still have to work hard to break even with the price you paid to acquire those leads.
So, do you have what it takes to be an insurance agent?
If yes, then you should also choose which type of insurance agent you want to be. We have discussed some of the important differences between a captive and an independent insurance agent. Having a non-traditional way of making cold-calls and knocking on doors may seem old school, but it still works.
The answer ultimately depends on YOU! Sounds cliché but that’s the truth.
The secret is having a steady stream of leads and closed deals every single week, as well as building partnerships with niches whom you can refer other clients to.
And this is exactly what I teach inside Fully Covered – how to generate a consistent flow of leads for you and your partners to make good money as an insurance agent!
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