Finding A Life Insurance Agent: Where To Start?

Finding a life insurance agent can be a challenging task. It is important to find an agent who understands your financial situation, including your income, tax brackets, and any other financial assets and obligations. They should also be able to explain the different types of insurance and answer any questions you may have. Additionally, a good life insurance agent will provide you with a written document that outlines your financial and personal situation and describes how the life insurance policy fits into it.

There are two main types of life insurance agents: captive agents, who represent a specific insurance company, and independent agents, who represent multiple insurance companies. When choosing an agent, it is important to consider their licensing, expertise, reputation, and experience. You can ask for referrals from friends and family or use online tools to find licensed agents in your area. It is also recommended to check for any complaints filed against the agent and to ensure they are in good standing with their licensing body.

Captive vs. independent agents

When looking for a life insurance agent, it's important to understand the difference between captive and independent agents. Here's a detailed overview:

Captive Agents:

Captive insurance agents work exclusively for a single insurance company and sell only their policies. They are under contract with that insurance carrier and receive a regular salary, along with commissions on the policies they sell. One of the main advantages of being a captive agent is the support provided by the parent company, which can include administrative staff, office space, and marketing. Captive agents also benefit from the broader marketing strategy and brand recognition of the insurance company they represent. Additionally, captive agents have lower startup costs since they are not responsible for their overhead expenses.

However, a significant trade-off is the lower commission rates compared to independent agents. Captive agents have limited product selections and cannot shop around for insurance products, resulting in lower income potential. They are bound by the rules and insurance rates set by the parent company and have less flexibility in making their own business decisions.

Independent Agents:

Independent insurance agents, on the other hand, work with multiple insurance companies and sell policies from various carriers. This gives them greater access to different insurance products, such as health, property, and general liability insurance. They have more control over how they run their business and can offer their clients a wider selection of coverage options. Independent agents typically earn a higher percentage of sales and higher commissions than captive agents.

However, there are also downsides to being an independent agent. They do not have access to the same level of support and referrals provided by insurance companies to their exclusive agents. Independent agents are generally responsible for their overhead costs, including startup costs, licenses, and marketing expenses. They may need to partner with other agents or form agencies to share these expenses.

In summary, the choice between captive and independent agents depends on various factors, including income potential, flexibility, support, and control over business operations. Captive agents offer stability and the backing of a single insurance company, while independent agents provide a broader range of product options but require more independent business management.

Agent experience

Life insurance policies can be complex, so it is important to find an insurance agent with sufficient experience to help you choose the right policy for your needs.

A good rule of thumb is to find an agent who has been in the life insurance business for at least three to five years. If they have less experience than this, they should at least have a relationship with a more seasoned agent who can be a part of the process.

Relevant Expertise

It is also important that your agent has relevant expertise. Life insurance agents should maintain a strong understanding of the products they are selling, as well as competence and a commitment to continuing education relevant to life insurance. If an agent sells you a life insurance policy that they don’t fully understand, you may end up with a completely unsuitable policy.

Check Licensing and Credentials

Be sure to check your state’s insurance department to ensure that the agent is properly licensed and in good standing. Many states allow you to check license status online. Any person selling insurance must be licensed with the insurance department in the state where the policy is sold.

Review Complaints

When checking on licensing, you should also check if the agent has had any complaints filed with the insurance department. You can also do an internet search with the agent’s name + complaints to see if anything comes up. If you do find a complaint, be sure to check the source to determine its credibility and whether the complaint is reasonable.

Relevant expertise

When looking for a life insurance agent, it is important to find someone with relevant expertise. Here are some things to consider:

Ask for Referrals

Word-of-mouth referrals from friends and family can be a good starting point. However, ensure that the agent is recommended for the right reasons, such as their expertise and professionalism, rather than just their friendliness. It is also worth noting that having an agent located close to home can be beneficial, as many people prefer in-person appointments and agents often prefer to know their clients personally.

Interview Multiple Agents

Take the time to meet and interview several prospective agents. Ask them detailed questions about your specific situation and see if they provide knowledgeable and suitable advice. This process can help you find an expert who truly understands your needs and can offer valuable guidance. It is also an opportunity to assess their level of experience and whether they have worked with similar clients in the past.

Look for Expertise and Accreditations

Seek out agents with advanced designations and certifications that showcase their expertise and commitment to ongoing education in the field. Examples of such designations include Chartered Property Casualty Underwriter (CPCU), Certified Insurance Counselor (CIC), Chartered Life Underwriter (CLU), and Accredited Adviser in Insurance (AAI). Agents with additional experience in other areas of the insurance industry, such as underwriting or claims, may also offer unique insights.

Check Licensing and Background

Ensure that the agent's licensing is up to date and meets the requirements of your state. You can usually verify an agent's license status and check for any complaints through your state's insurance department website. Checking their background and license helps ensure that your chosen agent is legitimate, properly qualified, and in good standing.

Licensing and credentials

Education Requirements:

Before pursuing a license, most states mandate completing a pre-licensing education course. This course can be undertaken online through a third-party financial education company, offering flexibility to aspiring insurance agents. The required hours for this course vary by state. For instance, California requires 20 hours of pre-license education for a life insurance license, while a joint life, accident, and health license necessitate 40 hours. However, some states like Texas and Virginia do not require a pre-license education course, instead relying solely on the licensing exam to assess professional knowledge.

License Application:

Once you have fulfilled the pre-licensing education requirements, you can proceed to fill out the application for your insurance sales license. It is imperative to be thorough and accurate in this step, as omitting information such as a criminal record will impact your approval. While a criminal record does not automatically disqualify you, failing to disclose it on the application will create complications.

Fingerprinting and Background Check:

Due to the sensitive nature of their work, life insurance agents are required to undergo a background check and submit their fingerprints. This process is typically facilitated by a third-party company, with the applicant bearing the fingerprinting fee, which ranges from $35 to $75. Some states also offer electronic fingerprinting options through law enforcement agencies.

Licensing Exam:

The licensing exam is a crucial step in becoming a licensed life insurance agent. This exam covers various topics, including state insurance regulations, general insurance concepts, specific policies related to life insurance, annuities, tax considerations, and the requirements for maintaining an insurance sales agent license. The exam content may vary slightly by state, so it is essential to consult your state's exam content outline.

Additional Licensing Requirements:

If your work involves marketing and selling securities or variable-contract life insurance products, additional licensing is necessary through the Financial Industry Regulatory Authority (FINRA) and the North American Securities Administrators Association (NASAA). The Series 6 and 63 licenses are the most common securities licenses for insurance agents, while the Series 7 license allows for a broader range of securities products to be offered.

State-Specific Requirements:

It is important to note that insurance licenses are state-specific, and requirements may differ across states. While many states follow similar steps, it is always advisable to consult your state's official sources for the most up-to-date and accurate information regarding licensing and credentialing.

Red flags

When looking for a life insurance agent, there are several red flags to be aware of. Here are some warning signs to look out for:

• Dodging questions: If the agent doesn't directly answer your questions, provides partial responses, or frequently changes the subject, this could be a red flag. A good agent should be transparent and forthcoming with information.
• Lack of written documentation: Be cautious if an agent primarily provides responses and proposals orally rather than in writing. It is important to request that all offers and proposals be provided to you in writing so you have a record of what has been discussed and agreed upon.
• Time pressure: Be wary if an agent pressures you to make a decision without allowing you time to carefully consider a proposal. A reputable agent will give you the time and space to make an informed choice.
• Isolation: This is a red flag. If an agent discourages you from having a third party present or consulting with others before making a decision, it could indicate they are not acting in your best interest.
• Limited choices: Be cautious if an agent presents you with only one or two options without first assessing your needs. A good agent will take the time to understand your specific needs and provide you with a range of suitable choices.
• Pushy sales tactics: If an agent uses high-pressure sales tactics or tries to push you towards a particular product without considering your individual circumstances, this is a red flag. A qualified agent will listen to your needs, assess your situation, and provide unbiased recommendations.
• Lack of experience: It is important to work with an agent who has sufficient experience in the life insurance industry. Look for agents who have been in the business for at least a few years and have a good understanding of different insurance products.
• Inadequate licensing and credentials: Always verify that the agent is properly licensed and in good standing with the relevant state insurance department. You can usually check license status online. Additionally, look for agents with professional designations or certifications that demonstrate their expertise and commitment to ethical practices.
• Complaints and negative reviews: Check for any complaints filed against the agent with the insurance department in their state. Also, look for reviews or testimonials from previous clients to get an idea of their level of service and professionalism.

Remember, while most life insurance agents are professionals who want to help their clients, there are a few bad apples in every bunch. By being vigilant and informed, you can avoid potential pitfalls and find a trustworthy and qualified agent who has your best interests at heart.

Frequently asked questions