Alyssa Lane
Life insurance is one of many insurance products that individuals can use to ensure they have access to money when unexpected life events occur. A life insurance license permits you to sell annuities, term, and cash value life insurance. A life and health insurance license is the most common type of insurance license and enables you to sell life insurance products and policies that provide protection for medical expenses, loss of income due to disability, and the need for long-term care. Each state has its own insurance exam, and there are state-specific topics you will need to know.
| Characteristics | Values |
|---|---|
| License type | Life insurance license, Life and health insurance license, Health insurance license, Securities license |
| Products | Annuities, Term life insurance, Whole life insurance, Universal life insurance, Variable life insurance, Variable universal life insurance, Equity index universal life insurance, Medicare products, Mutual funds, Variable annuities, Indexed life insurance |
| Requirements | Passing a state licensing exam, Meeting other application criteria, Registering with the Financial Industry Regulatory Authority (FINRA), Registering with the North American Securities Administrators Association (NASAA), Passing the Securities Industry Essentials exam (SIE) |
| Additional information | A life insurance license will only allow you to sell life insurance, whereas a life and health insurance license will enable you to sell a wider range of products |
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What You'll Learn
Annuities
If you have a life insurance license, you can sell annuities, which are financial products that provide living benefits in the form of income. Annuities are typically used to supplement retirement income and can guarantee payments for the rest of the annuitant's life. There are two main types of annuities: deferred annuities and immediate annuities. Deferred annuities allow individuals to save money for retirement or other financial goals, while immediate annuities create an immediate income stream. For example, an individual can use money from an inheritance or property sale to set up an immediate annuity that provides monthly payments for life.
Fixed annuities, a type of deferred annuity, are considered less risky because they guarantee a minimum rate of return. They include single premium annuities, longevity annuities, fixed-rate annuities, qualified longevity annuities, and fixed index annuities. Fixed index annuities are regulated by the state departments of insurance and the National Association of Insurance Commissioners. A standard life insurance license issued by your resident state is sufficient to sell fixed annuities.
Variable annuities, on the other hand, provide higher potential returns but come with greater risk. The performance of variable annuities is derived from stocks, bonds, and other investments, and they are classified as securities by the Securities and Exchange Commission. Agents selling variable annuities must have a state license and be registered with the Financial Industry Regulatory Authority (FINRA). To sell variable annuities, agents may need to pass specific exams, such as the Series 6 or Series 7 Exam, and obtain sponsorship from a broker-dealer firm.
Selling annuities can be lucrative for agents due to the higher commissions earned compared to other insurance products. However, it is important to understand the complexities of annuity contracts and the specific licensing requirements for different types of annuities. Consumers' interest in annuities tends to fluctuate with economic conditions, and there has been a recent surge in annuity sales due to fears of economic uncertainty and the desire for guaranteed income in retirement.
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Term insurance
In summary, term insurance is a basic and affordable type of life insurance that provides financial cover for a specific period, ensuring your family's financial security in the event of your death. It is important to note that term insurance does not offer any savings or investment benefits, but it can be a cost-effective way to provide peace of mind and protect your loved ones.
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Universal life insurance
Variable Universal Life Insurance gives lifetime protection and payment flexibility, with more investment options. You can invest part or all of your cash value in "subaccounts". However, you have to choose and manage investments as you would in a brokerage account, and you assume more risk, including the possibility of losing part or all of your principal.
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Variable life insurance
There are several types of variable life insurance policies, each offering different levels of risk and cost. Some examples include:
- No-lapse variable life insurance: This type of policy guarantees that the policy will not lapse, as long as the premiums are up to date and other requirements are met, regardless of how the investments are performing.
- Long-term variable life insurance: This type of plan focuses on long-term investment growth and may offer no-lapse periods during the initial years if premiums are paid on time.
- Variable survivorship life insurance: This type of policy covers two individuals and pays out the death benefit only after both have passed away.
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Medicare products
If you're interested in selling Medicare products, you'll need to obtain a life and health insurance license. This is the most common type of insurance license and will enable you to sell life insurance products as well as policies that provide protection for medical expenses.
A life and health insurance license will allow you to sell a range of products, including:
Term Life Insurance
Term life insurance provides coverage for a specific period, such as 10, 20, or 30 years. If the insured person passes away during the policy term, their beneficiaries will receive a death benefit. Term life insurance is often the most affordable type of life insurance and is suitable for those who want coverage for a specific period, such as to protect their loved ones during their working years or while they have financial dependents.
Whole Life Insurance
Whole life insurance, also known as permanent life insurance, provides coverage for the insured person's entire life, as long as they continue to pay the premiums. In addition to a death benefit, whole life insurance may also build cash value over time, which can be borrowed against or withdrawn under certain circumstances. Whole life insurance is often more expensive than term life insurance but offers more comprehensive coverage.
Universal Life Insurance
Universal life insurance is a type of permanent life insurance that offers flexible premiums and death benefits. Policyholders can adjust their coverage over time, making it a good option for those who want long-term coverage but may have changing needs. Universal life insurance may also build cash value, which can be invested to earn tax-deferred interest.
Variable Life Insurance
Variable life insurance is a type of permanent life insurance that offers both a death benefit and an investment component. Part of the premium payment goes towards life insurance coverage, while the rest is invested in stocks, bonds, or mutual funds. The cash value of the policy and the investment returns may vary depending on the performance of the investments. Variable life insurance often requires additional licensing and registration, such as the Series 6 or 7 securities licenses, to sell and advise clients on these products.
Annuities
Annuities are financial products that provide a steady income stream during retirement. While they are typically funded by life insurance companies, they are not designed to provide death benefits. Instead, they offer living benefits in the form of guaranteed payments for a specified period or even for the annuitant's lifetime. Annuities can be a valuable tool for retirement planning and are often sold by licensed life insurance agents.
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Frequently asked questions
A life insurance license allows you to sell life insurance policies, annuities, and related financial products. It also enables you to work with clients and beneficiaries to process claims.
With a life insurance license, you can sell term life insurance and cash value life insurance, including Universal life, Variable life, Variable Universal life, and Equity Index Universal life.
Yes, if you plan to sell securities or variable-contract life insurance products, you will need a license from the Financial Industry Regulatory Authority (FINRA) and the North American Securities Administrators Association (NASAA). The Series 6 and Series 7 licenses are common securities licenses for insurance agents, allowing you to offer a wider range of financial products.
No, a life insurance license typically only covers life insurance products. If you want to sell other types of insurance, such as health, accident and sickness, property, or casualty insurance, you will need additional licenses or endorsements. These requirements vary by state, so be sure to check the regulations in your area.
With a life insurance license, you can become a life insurance agent, working independently or for a specific insurance company. This career path offers a great work atmosphere and ample job opportunities. You can also consider pursuing additional licenses, such as health insurance or securities licenses, to expand your offerings and better serve your clients' diverse needs.
