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Life Insurance Agents: What Do They Do?

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If you are looking to create a comprehensive financial plan to map out your financial future, then you will probably need to consult with a life insurance agent at some point, especially if you don’t currently have adequate life insurance coverage. Life insurance is considered the foundation for most financial plans, so this person will be a vital part of your financial planning “team.” It is important that you choose an agent with whom you feel comfortable and can trust with your financial information. 

While there are multiple ways to find a good life insurance agent in today’s marketplace, it’s important to understand what their common titles are and how they differ from each other. This article explores the different types of life insurance agents, what they do and which might be the right fit for you. 

What is a life insurance agent?

In essence, a life insurance agent is someone who carries a valid life insurance license for each state that they operate in, and sells life insurance policies to individuals and/or businesses. Many life insurance agents are also financial planners, income tax preparers, mortgage loan officers or group benefits specialists. 

Some life insurance agents carry professional designations such as the Certified Financial Planner(R) credential, the Chartered Life Underwriter designation (CLU) or the Chartered Financial Consultant designation (ChFC). Group Benefit specialists may carry the Certified Employee Benefit Specialist designation (CEBS). Life insurance agents may be referred to as captive agents — working directly for the carriers —  while others act independently. We will examine this factor in more detail later. 

What does a life insurance agent do?

A life insurance agent’s job is primarily to sell life insurance policies and annuities to individuals and/or businesses. They may do this within the context of a comprehensive financial plan or they may act as the only financial advisor that a customer has established. 

A life insurance agent will typically begin the process of finding coverage that fits your needs by collecting several pieces of information, such as your date of birth, gender, health condition, the amount of outstanding debt and the number of dependents you have. Then the agent will examine your cash flow and balance sheet. 

If you have significant debt, then a term life insurance policy with a larger death benefit will likely be necessary. Young families are often the most at-need of life insurance because of their need to provide for small children until they are grown, and because they typically carry large higher outstanding debt, such as a mortgage and/or student loans. 

Once the agent has collected all the necessary information, they will compare your needs to the range of options that are available, in order to choose the life insurance policy or annuity that best fits your insurance requirements. The agent will assist you with filling out the application, obtaining the necessary medical data and submitting the application to the insurance company. 

After the policy or contract has been issued, the insurance agent will follow up to make sure that you understand the terms of your coverage or annuity. In the event of your death, the agent will typically be the one to deliver the death benefit check to the beneficiary.

How do life insurance agents get paid?

The vast majority of life insurance agents work on commission. When they sell a policy, the life insurance company will pay them a percentage of the premium (calculated on the first year, in most cases). For annuities, the commission usually also equals a percentage of the amount that is invested. Annuity commissions generally run anywhere from 5 to 8 percent depending on the carrier. 

There are a few life insurance agents who do not earn commissions but are instead paid a salary by the insurance company or financial planning firm. Many fee-based firms do this so that the life insurance agent will provide completely unbiased advice to clients. 

Life insurance brokers vs. agents

“Captive” life insurance agents work with a single company and are only allowed to market that company’s products and services. Other life insurance agents are independent and can sell some or all of the products for a full range of different life insurance companies. Those who can do this are usually called life insurance brokers. Here is a breakdown of the pros and cons of using a broker versus a captive agent when it comes to shopping for life insurance.

ProsCons
BrokersHave access to a much wider range of products and services
Can usually provide a better solution as a result of this
Represent the client when dealing with the insurance company
May be biased towards showing the client the products that pay the broker the highest commissions
May not be as knowledgeable about a specific company’s products
AgentsAre usually thoroughly familiar with their company’s products and servicesCan only show you their company’s products, which may not be the best in the marketplace
Represent the insurance company, not the client

How to choose a life insurance agent

It may be difficult in today’s marketplace to know where to start when it comes to finding the right life insurance agent or broker. Here are a few tips to help you get started. 

Research online

A quick internet search will yield a long list of possible life insurance agents and companies available locally or based on popularity. Call a few of them and talk with the agent to see what they have to offer and how they may differ from other agents. You can also check for online feedback to see what other people’s experiences have been with that agent or their company.

Get a referral

Ask your family and friends who they use to buy life insurance. They may know of someone who is very competent in your area. You may be able to find a better agent or broker this way than you could from doing a random search. 

Talk to a financial planner

Many financial planners today are also life insurance agents or brokers. If you pay to have a comprehensive financial plan drawn up, then this plan will show you how much and what type of coverage you need. The planner who did the plan for you may be able to provide you with the right type of coverage on the spot, or you may take this information to another broker or agent so that they know exactly what you’re looking for. 

Do I need a life insurance agent?

If you know exactly what type and amount of life insurance that you’re looking for, then you may not need to enlist the services of a life insurance agent or broker. But if you don’t know anything about life insurance, then an agent or broker can be an invaluable resource for you. A good agent or broker should be able to quickly find the right type of policy for you and show you how much coverage you need. 

Pros of using an agent to buy life insurance

A good life insurance agent or broker can help you to cut through all of the marketing and nuance associated with applying for life insurance. If you have a few specific health conditions, your agent or broker should know which companies and products will allow you to be underwritten with the best possible rating. 

The agent or broker can also show you exactly how to fill out the application and submit it, and then may help you set up payments, whether in full or in installments. They will also often personally deliver the death benefit to your beneficiary in the event of your passing. 

Cons of using an agent to buy life insurance

Many life insurance agents and brokers work on commission, so there’s a chance they could be motivated to show you the product that pays them the most, rather than the product that is best suited to your needs. And a captive life insurance who works for a single company will only have that company’s products to choose from, which may not be the best available. 

The takeaway

  • Life insurance agents can help you to find the best policy or annuity.
  • Life insurance brokers work with many different carriers, giving you a much wider selection of products.
  • Life insurance agents and brokers can help you to fill out the application and submit it along with the results of your medical exam.
  • Life insurance agents will often deliver a check personally to the beneficiaries upon the death of the insured.
  • Agents and brokers may make commission-driven recommendations.

A good life insurance agent or broker can be a godsend for those who are new to the life insurance process. The agent can help you answer questions and select the policy or product that best meets your insurance needs. Agents and brokers can assist you through every step of the application process, and will stay in touch after the policy is in force to make sure that it still fits your lifestyle. Most agents and brokers work on commission, so keep that in mind when considering a policy; asking for several options can help provide you with a selection to determine which policy is right for you.

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