The best insurance agents know that selling insurance is about helping the customer.
You have to be able to understand why a given policy can help your clients save time, money, hassle, and heartache before you’ll be able to sell that policy effectively. Go into a sales conversation with your heart in the right place, and your customer will intuitively pick up on that and will feel safe letting you help them find the best solution for their needs.
But with all that said, insurance is a business at the end of the day. If you’re not making money at it, you won’t last long enough in the field to genuinely make a difference in your customers’ lives.
We talked to Randy Thompson, an accomplished captive agent with experience selling a wide variety of insurance products, to get his input on the most profitable insurance to sell. He’s been in the business for 21 years and offers a huge list of policy types to his clients—which means he’s chock full of wisdom about which products generate the most revenue and which aren’t quite as worthwhile. His advice will help you decide where to focus your efforts so you can make a good living and help your customers stay protected.
The short answer, according to Randy, is that selling life insurance is your best bet for building a stable, long-term income that keeps your agency’s cash flow rolling in.
There are a few nuances you’ll need to consider (explained in more detail below), but almost across the board, for any agency, life insurance has the best profit potential.
More important, Randy emphasizes, is the fact that life insurance also provides the best value for your customers:
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“Life insurance has the best payout rates for agents and team members, hands down. But it also does for customers. It solves the biggest problem: What happens to the family in the event of a devastating, unexpected loss of the policy holder? I always say we can live with a cracked windshield or a dented bumper, but we can’t replace Mom or Dad. The best thing we can do, as agents, is to try to take the financial pressure off of our clients when the worst thing happens.” |
Though it’s a difficult and sometimes painful topic to talk about, life insurance is so important to talk about with your clients. It’s just an added bonus that it also helps your agency stay profitable.
Plenty of agents flock to P&C insurance for a number of reasons. It’s easy to sell, the policies are often simple, and the customers tend to seek you out when they need assistance. If someone buys a house or a car, they know they need insurance; sooner or later, your phone will ring.
This is very unlike life insurance, where a large proportion of your ideal customers may never have even thought about purchasing a life policy, and another portion will appear dead-set against the idea at first (until you explain why having a life insurance policy is a necessity for their loved ones).
This all means that P&C looks like the most profitable insurance to most new agents and for agencies looking for quick growth.
However, the reality is often very different than it first appears.
First of all, the popularity of P&C sales means your competition will be steep. Everyone wants a slice of the pie because it’s “easy” to break into this side of the industry.
Second, the turnover on policies is far more rapid with, say, car insurance policies that customers may switch or drop at any time if they decide to trade in their vehicle or lower their coverage.
If you want to chase steady, long-term profit, Randy says you’ll want to switch your focus to selling life insurance.
Randy listed a number of factors that make selling life insurance a great choice for increasing your agency’s profit margin:
Not everyone buys a home or a car. And of those people who do, most can rest assured knowing they probably (hopefully) won’t have a major catastrophe that would require an insurance payout.
But it’s an unfortunate fact of life that everyone dies eventually. If a person has loved ones and wants to be able to financially take care of those loved ones after they’ve passed on someday, then they need a life insurance policy.
Randy says, “Everyone with a pulse is a potential life insurance customer.”
Making a sale today and then receiving monthly or annual payments for the next several years is something most people can only dream of. Insurance agents, however, have the opportunity to sell a life insurance policy right now and then cash in on those payments for decades (with the hope that each customer lives a long and healthy life).
Contrast this with the comparatively small handful of years you may get paid for a single auto insurance policy.
With any luck for both you and your customer (again, we’re hoping everyone lives a very long and healthy life) you’ll potentially have several decades worth of premiums to reinvest in your business. Invest this money wisely, and you’ll have access to growth opportunities you wouldn’t normally be able to act on if you had a more limited cash flow from shorter term policies.
Both can be lucrative. But Randy highly recommends focusing on universal life policies for the benefit of your customers.
Term life insurance typically covers a person for the next ten to twenty years or so. Customers can take advantage of a lower premium while they’re young and healthy, which means selling term life to younger adults often seems easier.
That early convenience comes with a price, however.
When your customer ages out of their term life plan, they’ll have to decide whether to drop the plan and go without life insurance or renew their coverage. Renewals often cost far more than the initial plan did—the customer is now ten to twenty years older, and they may have picked up some health conditions along the way—so many people choose to just let the policy expire.
Randy says only 1.2% of term life plans ever result in a payout, often because most people survive beyond the expiration date of their plan. This means many customers will view the money they paid over the years as a total waste, and you’ll have a much harder time convincing them to renew.
“The IRS says the average life expectancy is age 90 to 92. So if you’re 30 years old and you buy a ten- or twenty-year term policy, chances are pretty good that you’re going to waste your money on that and your family will never get to collect on the policy.”
Randy says a lot of agents fall into the trap of selling term life because they think customers care only about the lower monthly premium, and therefore it seems easier than upselling to a universal policy.
“But if only 1.2% of term policies pay out, that means more than 98% of people cancel their policies before they die. It just gets too expensive to keep going with term life as you get older.”
With a universal plan, on the other hand, the customer receives permanent, lifelong coverage. Yes, it comes at a higher monthly cost, but there’s a 100% chance their loved ones will receive the benefit someday.
That investment is never wasted, and your customer will be more satisfied that they’re getting what they paid for.
"Customers care about more than low monthly premiums. Yes, universal plans come at a higher monthly cost but there's a 100% chance their loved ones will receive the benefit someday."
—Randy Thompson, State Farm Insurance Agent
Speaking of investments, universal policy holders can pay more than the minimum premium amount and have the surplus deposited into an investment account. That money will accrue interest over the life of the policy—multiple decades, in many cases—as a tax-deferred investment. The saved cash can then be disbursed to the policy holder’s family upon death, or the policy holder can access that cash if they ever need an emergency fund.
“Instead of paying $50 per month for a term life plan, a customer can pay $200 per month for a universal life plan,” Randy explains. “But what’s nice is that they’ll also have access to this savings account that earns interest like an index fund.
“After several years of saving, that customer will have $50,000 or more just sitting around that they can use for other things if they need to. That’s way better than paying a low premium for a policy that will expire and give them nothing, and then will be too expensive to renew.”
The benefits of a universal life plan are far better than a term life plan for your customers, in other words. And the higher premium and longer duration of the policy—a lifetime, rather than ten or twenty years—puts extra money in your pocket too. For these reasons, Randy says universal life plans are the best option for everyone involved.
“The purpose of insurance, in my opinion, is to be a financial safety net when things go bad,” Randy explains. “I always tell my customers, you pay me a little check now so that I can pay your family a huge check later when they need it.”
In his view, it all comes down to asking customers the right questions.
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“If something happens to you, what’s your plan for that? How will your family handle it financially if X, Y, or Z happens to you? If you don’t have a plan in place already for these events, let’s figure out some options for you and make sure they’re affordable.” |
“If you want to sell Bibles, you want to go and talk to some Christians. They’re the ones who read that book. And if you want to sell life insurance, the most likely person to buy more life insurance is the believer who already owns it,” Randy explains. “So start with your existing book of business.”
“Approach one of your clients and say:
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‘Hey Stacy. You’ve got this quarter million dollar term policy with us. You have fifteen years on that plan, but then you’re going to have a problem. Will that amount be enough in fifteen years when you’ll be [X age]? Are you going to want to renew at a higher price then, or should we switch you over to a universal plan now and lock in a lower price? Also, why aren’t we doing this for your husband? And your kids? They should have policies, too.’ |
Randy continues, “We talk all day long to our existing life insurance customers, because they’re the ones who are inclined to buy more.”
Your home and auto insurance customers are another fantastic untapped market for selling life insurance policies. For one thing, these folks already work with you, trust you, and know what to expect when they purchase with you. For another thing, you know they hold significant debt in the form of a mortgage or an auto insurance loan.
Randy tells his customers:
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“No debt should last longer than the person who created it. What kind of a person signs a 30 year mortgage or a seven- to eight-year car loan knowing there’s a good chance their spouse or children will be stuck with that debt someday? Let’s make sure you’ve got a great life insurance policy in place so nobody gets stuck holding your bill someday.” |
Pivoting from a home or an auto insurance sales mindset to suddenly focusing on life insurance isn’t always an intuitive switch. These resources can help you get new leads and learn to steer conversations toward a discussion about life insurance:
When in doubt, contact us at EverQuote. We’ll help you find high-intent leads so you can grow your life insurance sales book right away.