A Former Life Insurance Agent's Best Advice for Hiring an Agent

Many people don’t trust life insurance agents. I know because I used to sell life insurance.

Despite all of my attempts to educate the people I met with, so they could make the best decision for themselves, and to offer only the amounts and types of insurance coverage they needed, it was tough to convince some of them that I wasn’t trying to take advantage of them.

There’s a good reason for that lack of trust: many life insurance sales agents are paid commission only. So it’s not uncommon for some to try to convince consumers to buy expensive products they don’t need. Also, some agents work with only one company, which makes it harder to compare policies and prices.

If you’re looking for a life insurance agent, you can take these steps to find one you can trust. Also, we’ll discuss whether you even need an agent to help with your insurance needs.

6 questions to consider before you hire a life insurance agent

You don’t necessarily need to work with a life insurance agent. But in some cases, it may help you learn more about the policy you’re purchasing and help you compare multiple options. To help you find a good agent, here are six questions to ask.

Are they non-captive or captive?

An independent life insurance agent works with several different life insurance companies, allowing them to find the right policy that aligns with your needs and budget.

In contrast, captive agents work only with one insurance carrier, which means if you want a policy, you’ll have to do your own research to determine whether the product the agent is selling is the best one available for you.

I was a captive agent when I sold insurance, and we outsourced to an independent agent only when someone’s health profile made it impossible for them to get approved for one of my employer’s policies.

In general, you’ll want an insurance agent who will not only help you shop around but also has the relationships necessary to provide you with multiple options from different insurance agencies.

How do they determine your needs?

There are many philosophies for determining how much life insurance you need. Some financial experts and life insurance agents recommend taking a multiple of your income — say, 10 or 12 years — and purchase that amount of coverage.

For example, if you earn $50,000 a year, you may purchase between $500,000 and $600,000 in insurance coverage.

The problem with this approach is that it’s arbitrary. Every situation is different, and it’s crucial that you do your due diligence to ensure your loved ones are taken care of if something happens to you.

One thing I loved about the insurance agency I worked for is that agents always started with a comprehensive fact-finding process. We talked with prospective clients about their current financial situation, as well as their future goals. We also talked about their sentiment surrounding insurance and how they approach the decision.

Finally, we’d go through a needs-based approach to determine exactly how much money their loved ones might need if they died. We’d cover immediate costs like funeral expenses and medical bills. Then we’d talk about debts, income replacement, education and retirement savings, and more.

Again, every situation is different, and working with an insurance broker who will go through this process with you will give you a much more accurate picture of how much life insurance you need.

Are they open about compensation?

Many, though not all, life insurance sales agents are paid commission only. This arrangement may provide an incentive to some to either sell you more coverage than you need or sell you a type of insurance you don’t need.

Always ask upfront how a life insurance agent is paid. If it’s commission-only, that doesn’t necessarily mean they’re going to try to pull a fast one on you. But that may be more likely to happen compared to a situation in which the agent is paid a salary.

If an agent refuses to provide details about their compensation, or you don’t feel comfortable with their answer, it may not be a great fit.

Are they trying to push more expensive products?

There are several different types of life insurance products available. But some are much more expensive than others, providing a financial incentive for some agents to push them even if they’re not in your best interests.

For instance, the insurance company I worked for prioritized whole life insurance, even though the vast majority of people would benefit more from term life insurance. I didn’t feel comfortable with that, so I only sold two whole life policies over two years.

The downside is that, though I sold a lot of policies, I didn’t make enough money for the gig to be sustainable after I graduated from college.

Again, in most cases, term life insurance is the best option. If an agent is having you wonder, is life insurance a good investment, they’ve gone too far because life insurance shouldn’t be considered an investment at all. If they’re trying to push whole life, some form of universal life, or even a kind of term-permanent hybrid, don’t be afraid to ask why and try to steer the conversation back to more affordable options.

Are they licensed?

Life insurance agents in the U.S. are required to be licensed in the states in which they sell policies, and each state has different licensing requirements. When I sold insurance, I was licensed in Utah because that’s where most of my business was. But in some cases, I applied for insurance licenses in other states because I had enough prospective clients to make it worth it.

As you interview different agents, ask them for their license number and look it up with your state’s department of insurance. If there’s no match, you may be dealing with one of the many different life insurance scams out there.

Do they have designations?

Another reason some life insurance agents aren’t a great fit is that they don’t know enough about the products they’re selling. Yes, each agent has to pass an exam to get licensed, and I learned a lot from studying for that test.

But I’ve learned many things about life insurance since I stopped selling it that I didn’t know before.

Although it’s difficult to vet an agent’s knowledge of a topic you may not be well-versed in yourself, an easy way is to check for designations — those little acronyms after their name on their business card.

There are dozens of different insurance-related designations, but the most important one for life insurance is Chartered Life Underwriter, or CLU. Agents must study for and pass an additional exam to achieve this designation, and the ones who have it will understand more about life insurance products than agents who don’t.

You may also consider working with an agent if they’re a Certified Financial Planner, or CFP. Although this isn’t an insurance-specific designation, CFPs must meet higher standards than other agents and financial advisors when they provide advice.

Do you need a life insurance agent at all?

As you walk through the questions to help you find a great agent, you may be wondering whether you need an agent at all. In short, the answer is no. There’s no requirement to work with an insurance agent to purchase life insurance.

Working with an agent can be beneficial for someone who prefers face-to-face interaction, and it can also help if you have a lot of questions and want someone to educate you about how life insurance works and your options.

Finally, if your situation is unique, you’ll likely find the right solution a lot easier by working with an independent life insurance agent versus a website.

But if your situation is straightforward and you don’t care to learn about life insurance, it may make more sense to purchase from an online broker.

For example, companies like Bestow and Ladder can offer quick term life insurance quotes and affordable rates. They’ll walk you through the quote process step by step and also provide resources, so you can learn about various life insurance products if you want.

Whether you work with an agent is for you to decide. Take time to consider your situation, needs, and preferences to decide which option is better for you.

The bottom line

Buying life insurance can be a stressful experience, especially if you’re working with a life insurance agent who doesn’t have your best interests in mind. Although interviewing life insurance agents can be time-consuming, it can help you save money in the long run and ensure you get the right policy for you.

If you’d rather just purchase a policy and be done with it, though, some of the best life insurance companies are online providers, which can help you get what you need without the complication of vetting individual agents.