What is the Most Profitable Type of Insurance to Sell?

To be a successful independent insurance agent, you need to create a sustainable business model. At the heart of that model needs to be profit, which is generated by selling insurance products to your customer base. 

Since there are so many different insurance products on the market today, there are a number of directions in which you can take your insurance business — based on your interests, your location and more. 

But, what is the most profitable type of insurance to sell? In this article, we’ll analyze the most profitable type of insurances as well as what goes into selling each.

Most Profitable: Life Insurance 

Life insurance is generally considered to be the most profitable type of insurance to sell. In just the first year alone, independent insurance agents could expect to make anywhere between 40% and 120% of the premium of new policies they sell in commissions. 

That’s quite a substantial sum, and it’s significantly more than most other types of insurance. 

Not only that, but life insurance policies also have the longest average contract. A term life insurance policy, for example, could have a term of 10 to 30 years that people are locked into once they sign up, while an auto insurance policy needs to be renewed every six months. 

This means that independent agents will earn renewal commissions for a longer period of time, on average, with life insurance compared to other products. In most cases, agents can earn about 2% on the annual premium of life insurance plans, as long as the policy is still active.  

Why is Life Insurance So Profitable to Sell? 

The main reason why life insurance is profitable for agents to sell is that it brings in the most money for insurance carriers. Not only are these policies the longest-lasting of any type of insurance, they also typically are for the largest amounts. 

As with anything, the more money an insurance carrier can make off policy sales, the more money they are likely to give to the agents that sell them in the form of higher and more guaranteed commissions. 

Things to Consider When Selling Life Insurance 

Agents need to understand that there’s a give-and-take with selling life insurance. While it certainly does offer the highest potential for profitability — at least when considering the sale of one life insurance policy to another type of policy — it’s also the toughest type of insurance to sell. 

Other types of insurance, such as auto or home, are often mandated by law. If you want to drive legally, you need to have auto insurance; if you own a home and are paying a mortgage, your lender will often require you to carry home insurance. 

Life insurance, by contrast, isn’t required. Because of this, it takes more nuanced marketing and sales skills to find prospective clients and then convert them into customers.  

So, while life insurance is considered to be the most profitable type of insurance on a policy-to-policy basis, it often takes more work to close one deal compared to other types. 

Profitability of Other Types of Insurance 

There’s more than one way to become a sustainable and profitable independent insurance agent. Many agents focus solely on property and casualty insurance, for example, and build very successful operations. 

Most insurance products offer independent agents an up-front commission for selling new policies, as well as an additional commission every time a policy is renewed. 

Health insurance typically offers an upfront commission between 7% and 25% of the total premium. Auto and homeowners insurance offer commissions of between 10% and 15% of the premium. 

The renewal commissions on both of these products are usually lower, in the range of 2% to 5%. 

There are some advantages to selling these types of policies. As mentioned, auto and home insurance are mandated by law for most people, and almost everyone knows they need health insurance. 

What this does is create a very large built-in target audience for insurance agents, regardless of where they’re located. 

At the same time, this creates a lot of competition. Consumers have loads of options for auto, home and health insurance, which often drives the price of these policies down while driving the price of marketing up for agents. 

In other words, agents will often have to spend more money — and put in more effort — to attract customers for these types of insurance products, while bringing in less money in commissions. 

Which Type of Insurance Should You Sell? 

There are a lot of factors to weigh when you’re considering what type of insurance to sell. The big commissions and profitability of life insurance is great, but it often takes a lot more work to close deals. 

On the flip side, it’s a lot easier to sell auto and home insurance policies, but you typically need to sell a lot more of them to make the same in commissions. 

If you need guidance, advice and support to make your independent insurance agency profitable, you can turn to the experts at Good Life Insurance Associates. 

We help support independent insurance agents by providing tools, education and access to more than 100 national carriers. For more information, contact us today.