If you're wondering whether life insurance is a good career path to pursue, there are a number of factors to take into consideration. The life insurance industry is definitely a large and growing segment of the overall financial services industry. It is possible to make a good living in the life insurance industry if you are well-suited to succeed as a life insurance sales representative, actuary, or underwriter.
Life Insurance Sales Representatives
Selling life insurance is the most common path for entry into the life insurance field. Life insurance agents typically work on 100 percent commission, so the amount a person can earn in this occupation can vary significantly. People who work hard at prospecting for customers and are good at closing sales can do very well, while others may see little to no income. It can be tough to make a living in this field, especially at first, but those who are successful can make a lot of money right away and into the future.
- As outside sales professionals, life insurance representatives are exempt from the minimum wage provision of the Fair Labor Standards Act. This means their compensation can be fully based on commission, with no guaranteed base wage.
- According to Comparably.com, the average pay for life insurance sales representatives in the U.S. is around $59,000 per year, with some people earning a lot less, and many making significantly more.
- The amount one earns for each policy sold varies based on the life insurance company for which one works. Most companies pay a significant portion of the first year's premium to the sales representatives (as much as 80 or even 90 percent).
- Life insurance representatives who stay in the industry also earn residual income on previous sales, as a portion of each year's renewal premiums (generally around five percent), is paid out to the person who initially sold the policy.
- The contract between the company and the sales representative determines how residuals are to be paid. Typically, those who leave the company within the first few years of employment do not receive residual income on what they sold.
- Life insurance sales representatives have to be licensed in accordance with the insurance laws of the state(s) in which they solicit business and sell policies. They typically have to be licensed as insurance producers.
- Consumers have options when it comes to life insurance; they don't have to buy directly from a life insurance sales representative. This fact makes this field particularly competitive and challenging. For example:
- People who work for a company that offers employee benefits often receive company-paid life insurance and can opt to purchase additional coverage from the provider their employer uses.
- Financial advisors and general practice insurance companies (such as ones that offer home and auto coverage) often also sell life insurance products. Many people are likely to purchase from someone with whom they already have a relationship.
Life Insurance Actuaries
Risk analysis is an important aspect of the life insurance industry. Actuaries are a special type of business analyst that focuses on risk and probability in relation to the type of insurance policy that a company is selling. For life insurance, the work of actuaries involves analyzing factors that impact how likely it is that a company will have to pay out on a policy, given certain criteria, such as age, weight, smoker/non-smoker, occupation, medical history, etc.). They determine what rates a life insurance company should charge for policies that fall within certain risk categories.
- According to the Bureau of Labor Statistics (BLS), the median pay for actuaries (across all types of insurance) is more than $111,000 per year. ZipRecruiter indicates that the mean annual pay for life insurance actuaries is around $107,000.
- Working as an actuary requires a degree in a data-driven field of study. Actuaries typically have bachelor's or master's degrees in mathematics, statistics, finance, economics, or other closely related fields.
- A degree alone is not sufficient. Actuaries must pass a series of exams administered via the Society of Actuaries (SOA), which are designed to ensure that they can demonstrate expertise in the field listed above.
- After initial credentialing as an SOA member, actuaries can seek advanced status by passing additional SOA exams. These credentials include Chartered Enterprise Risk Analyst (CERA) and Fellow of the Society of Actuaries (FSA).
- BLS indicates that job openings for actuaries are expected to grow 24 percent between 2020 and 2030, which is higher than the average for all jobs (which is eight percent).
- This rate of increase translates into an expected total of about 2,400 jobs being added each year, most of which are expected to be replacement positions for people who change fields or retire.
Life Insurance Underwriters
Life insurance companies also have underwriters on staff. Rather than using data to make decisions about what the insurance company should charge for policies based on each category of risk, life insurance underwriters decide which category individuals who apply for coverage should be placed in. They review data about each applicant, such as age and medical history, then use that information to determine if the person is eligible for coverage. They assign each eligible applicant to a risk category. The fee associated with that category, which has been determined by an actuary, is the premium the individual will have to pay in order to secure coverage.
- BLS indicates that the median pay for insurance underwriters (across all industries) is over $71,000 per year. ZipRecruiter reports a similar amount as the mean annual compensation for life insurance underwriters.
- Most life insurance companies prefer to hire underwriters who have at least a bachelor's degree in business administration or a closely related field.
- Insurance underwriters do not have to be licensed, though some employers may require their underwriters to get an insurance producer's license anyway.
- Experienced underwriters who want to distinguish themselves may opt to seek certification as a Chartered Life Underwriter (CLU).
- BLS predicts that the number of jobs for underwriters will decline by five percent between 2020 and 2030. This is likely due to increased reliance on technology in the insurance industry.
Choosing the Best Career Path for You
If you are a self-motivated sales professional seeking employment in a field with unlimited earning potential, working as a life insurance sales representative may be perfect for you. The same is true for actuary and underwriter jobs if you are a highly analytical individual looking to put your knowledge of business and statistics to work as a risk management professional. If you're undecided and want to explore other opportunities, review a selection of in-demand jobs with secure futures. For even more ideas, check out this list of 100 of the best careers. You're sure to find several options that pique your interest.