Finding A Trustworthy Life Insurance Agent

Life insurance agents sell policies that provide financial safety nets for their clients' loved ones. It can be a rewarding career, but it's not an easy industry to break into. With high competition and a high burnout rate, it's important to know what to look for when choosing a good life insurance agent. Here are some key considerations:

- Referrals: While referrals from knowledgeable sources like financial planners or attorneys can be helpful, it's important to do your own assessment.

- Experience: Look for an agent with at least 3-5 years of experience. If they are less experienced, ensure they have a relationship with a veteran agent who can provide guidance.

- Expertise: Ensure the agent has a strong understanding of life insurance products, regulations, and industry trends through continuing education.

- Licensing and Credentials: Verify the agent is properly licensed and in good standing with your state's insurance department. Check for any complaints filed against them.

- Independent vs Captive Agents: Understand the difference between independent agents, who represent multiple insurance companies, and captive agents, who primarily represent a single company. This can impact the range of policies they offer.

Check they have relevant qualifications and licensing

When looking for a good life insurance agent, it is important to check that they have the relevant qualifications and licensing. This is a crucial step, as it ensures that the agent is knowledgeable, credible, and authorised to sell you insurance. Here are some key considerations:

Firstly, it is essential to verify that the agent has completed the necessary education and training. In most states, life insurance agents are required to take pre-licensing coursework or classes to prepare for the licensing exam. These courses cover a range of topics, including insurance industry regulations, different types of insurance policies, and insurance principles. The duration of these courses can vary, with some states mandating a minimum number of credit hours. For example, life insurance pre-licensing education typically requires 20 credit hours, while property and casualty insurance requires 90 credit hours.

Once the educational requirements are met, the agent must pass a licensing exam. This exam is typically administered by the state and covers topics such as state rules and regulations, insurance applications, policy riders and exclusions, taxes and retirement, and different types of policies. The passing score varies by state, but generally, a score of 70% or higher is required. It is worth noting that some states, like Texas, do not require pre-licensing courses, and agents are expected to study for the exam independently.

After passing the exam, the agent must apply for their license by submitting the necessary documentation and paying the associated fees. This process is typically handled by the state's insurance regulation department and may include a background check and fingerprinting. It is important to note that exam results are only valid for a limited period, usually one or two years, so agents must apply for their license within that timeframe.

It is also worth mentioning that life insurance agents may need to obtain additional licenses if they plan to sell insurance in multiple states or offer various types of insurance products. Each state has its own licensing requirements, and selling certain types of insurance, such as variable-contract life insurance, may require licensing from financial regulatory bodies like FINRA and NASAA.

To summarise, checking that a life insurance agent has the relevant qualifications and licensing involves verifying their educational background, ensuring they have passed the necessary exams, confirming their license status and validity, and determining if they hold any additional licenses required for their specific scope of practice. By doing so, you can ensure that the agent is authorised to sell insurance and has the necessary knowledge and expertise to provide you with accurate and reliable advice.

Understand the difference between captive and independent agents

Captive and independent are the two main types of insurance agents. The difference between the two is that captive agents represent a single insurance company, while independent agents represent multiple companies.

Captive agents are contracted to work for a single insurance company and sell only that company's policies. They are sometimes called exclusive agents. In return, the insurance company will often provide support in the form of office space, administrative staff, and marketing. Captive agents also benefit from the insurance company's broader marketing strategy and receive carrier support, such as 24/7 customer service and ongoing training opportunities. They typically receive a regular salary, plus commission and benefits.

On the other hand, independent agents are not contracted to work with just one company. They can sell policies from multiple insurance companies, giving them greater access to different insurance products and allowing them to offer a wider selection of coverage options to their clients. Independent agents have more control over how they run their business and make all the decisions related to its operations. However, they do not have access to the same level of support and referrals that captive agents receive, and they are generally responsible for their own business expenses, such as rent, office supplies, and marketing costs. Independent agents typically earn a higher percentage of sales, but much of their earnings goes back into maintaining their independent business operation.

Ensure they have experience

When looking for a good life insurance agent, it is important to ensure they have experience. While it is not necessary to have a college degree to become a life insurance agent, relevant expertise and a strong background in sales are crucial. Look for an agent with at least three to five years of experience in the life insurance business. If they have less experience, they should at least have a relationship with a seasoned agent who can guide and support them.

The life insurance industry is highly competitive, with a high burnout rate. More than 90% of new agents quit within the first year, and this rate increases to over 95% when extended to five years. Therefore, it is essential to choose an agent who has demonstrated perseverance and success in this challenging field.

A good life insurance agent should also have a solid understanding of the products they are selling. They should maintain a baseline of product knowledge, competence, and continuing education relevant to life insurance. This ensures that they can provide suitable policy recommendations that meet your unique needs.

To verify an agent's experience and expertise, you can check their licensing and credentials with your state's insurance department. Most states require life insurance agents to obtain a license by completing pre-licensing education and passing a state-administered exam. Check if your state has specific requirements, such as minimum credit hours for pre-licensing education, and ensure that the agent you choose has met those standards.

Additionally, don't hesitate to ask the agent about their sales track record and how long they have been in the industry. You can also request references from past clients to get a sense of their level of experience and the quality of their work. Remember, a seasoned agent will be more equipped to navigate the complexities of the life insurance landscape and advocate for your best interests.

Check for relevant expertise

When choosing a life insurance agent, it is important to look for relevant expertise. Life insurance agents should maintain a baseline of product knowledge, competence, and continuing education relevant to life insurance. If an agent sells you a life insurance policy that they don’t understand, you may end up with a completely unsuitable policy.

To ensure that your life insurance agent has relevant expertise, you can ask them about their designation and how it is helpful and relevant to you. There are two main types of designations for insurance: professional designations and purchased designations.

Professional designations are earned through education and testing and indicate that the agent is serious about professional development. The benchmark professional designation for life insurance agents is the Chartered Life Underwriter (CLU). Agents who are also financial planners may carry designations such as Chartered Financial Consultant (ChFC), Certified Financial Planner (CFP), or Personal Financial Specialist (CPA-PFS).

Purchased designations, on the other hand, are available to anyone who pays for them and can be earned through a short seminar or cursory online course. Some examples include Certified Retirement Financial Advisor (CRFA), Certified Senior Specialist (CSS), and Elder Planning Counselor (EPC). It is important to note that insurance regulators have banned certain designations, particularly those that are senior-specific.

In addition to designations, you can also check the agent's licensing and credentials. All life insurance agents are required to have a license to sell insurance policies, and you can check with your state's insurance department to ensure that the agent is properly licensed and in good standing. You can often check the license status online through your state's license lookup page.

Review any complaints

When checking on an agent's licensing, you should also check if they have had any complaints filed against them with the insurance department. For example, California has an enforcement actions search tool. You can also do an internet search with the agent's name plus the word "complaints". If you do find a complaint, be sure to check the source to determine its credibility and whether the complaint is reasonable.

It is also worth noting that there are two main types of insurance agents: captive agents, who primarily represent one specific insurance company, and independent agents, who represent multiple insurance companies. This is an important distinction, as captive insurance agents will generally only recommend policies from their primary insurance company.

Frequently asked questions