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Earning Six Figure Residual Income as an Insurance Agent

Throughout the years, the insurance industry has drastically changed. In 2016 the Bureau of Labor Statistics found there are over 385,000 insurance agents in the United States alone with a prediction that another 45,900 will break into the market. With a US population of 325 million, it is fair to estimate there is one insurance agent for every 844 Americans. A 10% projected employment growth through 2026 makes this career progress faster than that of the average for all occupations.

While the environment is favorable for insurance needs and those numbers may seem to indicate a successful career for an insurance agent, competition is actually relatively high, and it an be a hard struggle for agents who normally earn his/her living on commissions from sales.

What Does an Insurance Agent Do?

An insurance agent is essentially a midpoint between insurance agencies and clients. Insurance agents and brokers sell insurance products from insurance agencies while assisting clients in choosing insurance coverages that best suit their needs and resources. This job is nowhere near simple, as substantial amounts of comprehension, analysis, and compromise are needed in every single interaction.

Aside from life insurance, there are many more policies covering property and casualty, health, disability, and long-term care insurance. An insurance agent can also sell varying investment products like mutual funds, variable annuities, and other securities.

A job as an insurance agent is both similar and different from other careers. Here are just some of the things a typical day in the life of an insurance agent may include:

  • Presenting leads, scheduling appointments and follow-up meetings with prospective, new, and existing clients
  • Working out client needs
  • Performing affiliate marketing for appropriate products
  • Closing sales on current prospects
  • Establishing new business production goals and making sure they are met per quota or deadline
  • Offering punctual, efficient, and friendly customer support
  • Building a network among business referral relationships and client connections
  • Assisting sales staff through contributions in quotations and working renewals
  • Being a team player as part of something bigger than just his/her job as an insurance agent

An insurance agent is like a marketer, sales agent, customer service representative, businessman, and teammate all in one.

Insurance Agent Professional Experience and Licenses

The challenges of being an insurance agent are not without advantageous equivalents, and agencies often require relative work experience and prerequisites when interviewing insurance agent applicants. Some of these include a college degree in business and economics, or in lieu of a degree, established proven sales ability. The reason for this is to maintain quality service in the representation of the insurance products and insurance agencies to ensure that every insurance agent will comply with their agency standards. Agencies also look for soft skills and personal qualities to help them perform their job productively.

States require each insurance agent to have licenses as well; one for selling life and health insurance and a separate one for property and casualty insurance.

Types of Insurance Agents

  • Captive Agents
    As the name suggests, these insurance agents are confined to only one insurance agency and can only sell insurance products from that particular organization. The perks of being a captive agent is brand recognition to gain the trust of their clients, and they can rationalize their processes and guarantee mastery knowledge of fewer insurance products.
  • Independent Insurance Agents
    These are the ones people refer to as “brokers.” Independent insurance agents are privately-owned business selling insurance policies in accordance with a variety of insurance companies. They represent the client to the agency instead of the other way around. However, a disadvantage for these insurance agents are limited resources while attempting to learn the many features of the policies from different companies.
  • Online Insurance Agent
    Online insurance companies are quite similar to a captive agency. They may be a single insurance carrier, but they do their selling online or over the phone from a service center instead of having a local agent office. Online insurance agents are cultivated to sell cheaper policies due to their lower limits sales, which may be great for some clients’ budgets, but sometimes you get what you pay for.
  • Robo-Advisors
    More of a variation in the industry than a specific type of insurance agent, robo-advisors are an online service providing automated portfolios depending on your preferences. With hundreds of options available, they consider personal references and unpredictable forces to effectively counsel and find options that best suit investors needs. They also have traditional financial advisors.

Advantages of an Insurance Agent Career

No matter the type, the benefits of being an insurance agent or broker are exclusive.

  • Easy Access
    With on-the-job training and many agencies that offer mentorship and teambuilding, becoming an insurance has few barriers to entry
  • Always Hiring
    Insurance agents enjoy an abundance of job prospects because most companies are commission-based pay
  • Passive Income
    In addition to direct communissions from policies sold, insurance agents earn a passive income stream every time a valid plan is renewed
  • Generous Commissions
    An insurance agent can earn a considerable amount of money based on varying interest rates from different types of insurance. An auto insurance policy allows 10%-15% in typical first-year commission in premium. Health insurance, on the other hand, grants up to 7%.

Working as an insurance agent in the industry for many years is rewarding as the renewal commissions build up and the passive income continues to roll in. What other job can you sustain a great lifestyle or even retire after twenty years without having to sell anything new ever again?

Let’s Talk Money: How Realistic is the Six Figure Residual Income?

Insurance agents earning six-figure residual income is not a myth. There are key factors affecting how much agents and brokers can earn. Whether they are working part-time or full-time, have a compensation agreement, or are working as an insurance agent on the side of other jobs, there are many components influencing the amount of money they make.

When it comes to life insurance policy sales, licensed representatives are granted compensation from an equitable commission. Contracted employees, on the other hand, have the alternative of receiving a salary. The majority of insurance agents and brokers work on contract; which means their commission may be their primary source of income.

The size of an agent’s client base is also a factor in how much money he/she will make as an insurance agent. In the case of captive agents, the companies they work with also have an impact on their net income, as well as their years of experience, like in other careers. It is also helpful for an insurance agent to have talent for selling and the determination and drive to persist the first years. At the end of the day, insurance agents and brokers determine for themselves how much they will make, a privileged few careers offer.

It is also important to note an insurance agent’s commission does not affect the cost of a client’s insurance policy. The competition is high to the point that one policy sold could be equivalent to several that did not sell. Some may even be rejected due to failed medical exams and other reasons, but insurance premiums are in no way related to an agent’s commission. The commission agents and brokers receive is a part of the premium from the insurance company for the sales they make.

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