Learn the truth behind how to sell final expense at a profit, and what the numbers are behind determining how profitable you can be in the final expense business.
Each week I interview many agents to see if selling final expense is (a) a good career for them, and (b), if they are a good fit for my agency. The smart agent prospects always ask about the financial potential a new final expense agent can expect. How to sell final expense profitably is a fundamental question every new agent MUST ask before ultimately deciding to sell final expense insurance.
In Learning How To Sell Final Expense Profitably, Commissions Are Important.
Let's begin by discussing commission rates in the final expense business. First, let's take some time to differentiate what one grosses versus what one banks.
Understandably, many agents who come into this business to learn how to sell final expense want to make the highest final expense commission levels available. Some feel the highest commission levels reflect the best final expense sales opportunities. We all certainly want to be paid what we're worth. But here's the deal. A new agent must look at selling final expense insurance NOT as an agent, but as a business first. If you ever have owned a business, you know there is difference between total sales (revenue), what the business pays to acquire those sales (expenses), and what bankable money is left over after expense (net income).
Agents learning how to sell final expense MUST remember that commissions reflect total sales, and not what you're going to bank (net income). This simple but fundamental differentiation must be taken into consideration through this entire conversation, as it sets the table as to what TRULY is more important.
Final expense commission rates vary wildly! Much comes down to not just commission rates, but also what you receive in return. Final expense commissions vary by product type. Some final expense companies pay lower commission than others. Many times a final expense agent's commission level is initially lowered to reflect what value is given back to that agent.
For example, when learning how to sell final expense at a lower commission rate, are you provided free final expense leads? New agents can expect a lower commission level if final expense leads are provided without cost as leads are (a) the "X-factor" in selling final expense, and (b), always cost someone money to generate.
Another reason commission rates may be lower while learning how to sell final expense could be due to the agency providing you hands-on training? And another factor: is the agency captive or independent?
The BIGGEST sin a new agent learning how to sell final expense can commit is to take a commission offer that does not provide the value you need to succeed (such as final expense training). Or that locks you into some kind of inability to move your contract carrier elsewhere (check out my article on the Truth About Selling Final Expense Insurance for more details).
All of these factors are extremely important to consider when learning how to sell final expense. And what I want to make clear is that a commission rate alone is not enough to determine if it's a good value or not. It is essential to consider ALL facets, such as final expense training, product availability, access to quality, vetted lead vendors.
What Costs Are There To Learning How To Sell Final Expense?
Besides the on-going expense of vehicle upkeep and fuel expense, the biggest investment in a successful career in selling final expense is in lead generation. The most successful final expense agents buy direct mail leads weekly.
To note, the numerical assumptions I'm making are based on buying final expense direct mail leads Adding other variables such as telemarketing or avatar final expense leads would make the learning how to sell final expense and the numbers behind more complicated than necessary. My goal is to show you how to replicate the top ten percent of agents. And of those ten percent, ninety to ninety-five percent are doing direct mail leads. It is a fundamental fact that new agents learning how to sell final expense NEED to follow the blueprint of success and not try to "reinvent the wheel."
The average investment weekly in final expense direct mail leads varies. My new agents learning how to sell final expense insurance purchase between 15 and 20 leads a week. Expect between a five-hundred and six-hundred dollar investment, depending on the kind of lead. Once your skill level develops in learning how to sell final expense, most agents ramp up lead flow considerably.
If you are receiving free final expense leads, you will lose more in your commissionable opportunity than purchasing your own if you are producing a high level of business. If have savings to invest in leads, you need to go independent.
If you know how to sell final expense, but have been on a free lead program, do the math I'm going to show you. You will blow your mind on how much money you're losing by having your agency provide your leads "for free."
The Ugly Reality of Learning How To Sell Final Expense - Chargebacks
What's a charge-back? A charge-back is a term for advanced commission repayable after somebody lapses.
For example, let's say you're advanced a $1,000 commission. If the person cancels her plan halfway through, you owe $500. You earned the first $500 while she paid her premiums. However, the other $500 is not yours, since the policy did not stay on the books long enough to earn that portion of the advanced commission.
Remember in learning how to sell final expense, we're selling mainly to fixed-income seniors and people on disability. Our prospects aren't making a killing. They may not make any more than $800 to $1200 a month.
To those of you wondering who could even afford a final expense policy at $800 a month, much less anything else: keep in mind that these people have income subsidies. Many times their housing is subsidized. Medicare is almost completely if not 100% paid for through subsidies. Many seniors at these income levels receive food stamps. Even though the income level is surprisingly low, our prospects know too well the what death is like and have enough desire and capability to part with at least a dollar to day to cover their final expense.
Considering the above as well as the inherent "world class procrastinating" behavior these prospects have, warrants that this particular product will have a higher lapse ratio. When you are learning how to sell final expense, it is imperative to understand that the typical final expense market is different than your white-collar market. While they know they need life insurance, it is still important for you to do your due-diligence in (a) finding the best areas to target final expense to, and (b), consider thoughtfully HOW to sell final expense, as an over-aggressive selling approach will increase your lapse rate.
Lapses happens to everyone learning how to sell final expense, as well as those agents who are tenured in the business. For example, my most utilized carrier has a 6 1/2 % lapse rate. That's phenomenal. That means my persistency level, a term we use for how much business is left on the books after a year of that business you sold, and mine's 93.5%. My worst carrier is probably right at 70 or 71%.
For your projection purposes, use a twenty-percent lapse ratio factor. If you sell five policies, and the average case size is $600 a premium, expect one of those to fall off. That doesn't mean the policy's will lapse immediately. It very well may lapse right away, but it may lapse six months from now, or even in month eleven.
The good news is for most final expense carriers, you'll earn the income for each month that Mildred paid and only have to pay back the advance you did not earn. Taking 20% right off the top keeps the metrics conservative. We want to make sure that we account for it in a conservative manner.
In learning how to sell final expense, many lapse and charge-back issues are manageable with better selling techniques combined with a more thoughtful approach to WHERE you target your lead generation efforts.
If at all possible, I instruct my agents to run their business in a rural, small-town area. My experience is that rural poverty has better quality of business than urban poverty. Don't know why, because they're both poor. Maybe it's because the different upbringing and values, as far as keeping bills and making sure obligations are met. But I've experienced a tremendous improvement in the quality of my business driving out to more rural environs.
Intangible Factors of How To Sell Final Expense - Training, Mentorship, and Carrier Accessibility
The intangible costs of learning how to sell final expense are potentially the most important factors to your success or failure. Intangible factors are defined as elements you cannot necessarily value in hard costs, such as training, mentorship, lead program accessibility, and final expense carrier accessibility.
If you're limited in any of those areas, you will lose a tremendous amount of money. One of the benefits of working with me and Final Expense Agent Mentor is that I help my agents through underwriting issues while at the point of sale. There are so many opportunities for final expense sales, but so much business is left on the table. Many agents learning how to sell final expense don't know who and where to turn to get business or a case closed. If you're a captive agent, or if you work with an agency selling one product, you leave so much money on the table it's unbelievable.
It's important to find an agency that understands the nuances of this business, and can communicate to you how to sell final expense successfully as I believe the intangible factors have the largest impact on your success or failure. Make no mistake: YOU have to get out and work hard. Nobody can deny that. But the second most important factor in successfully learning how to sell final expense is having an experienced and capable coach in your corner.
As straight-forward as final expense life insurance sounds, it's not easy. There's much to learn. And it's very nuanced. That's why training in the beginning can make a dramatic, long-term difference in your final expense career.
Putting Together The Numbers On How To Sell Final Expense Profitably
To make the math easy, let's assume a 100% first-year final expense commission. Also, we're doing a weekly final expense direct mail lead investment of $600, which would be about twenty leads weekly. Your commission advance is 75%. We're going to factor in a lapse ratio of 20%, and then a close ratio of 25%.
To better explain the close ratio, the assumption is based off someone who works his butt off on every single final expense lead. The agent is door knocking and calling to set up appointments. If you're not trying every feasible way to see these people, your closing ratio will be lower. But this number is reasonable to achieve, IF you do the hard work necessary.
Here's a break-down of how it looks. Five sales a week, 25% closing ratio, $600 premium. That's a $3000 week in volume. You make 75% as an advance. That's your advance gross commission. Understand that's what you bank now, but haven't "earned." Taking off for expected charge backs of 20%, that's $450 subtracted from $2250. This gives you an $1800 income before expenses.
Next you must deduct the $600 lead investment. $1800 minus 600 gives you a weekly net income of $1200. Remember: in the beginning, your net income is much smaller than what it will ultimately become. You do not have renewals. Nor do you have any as-earned income. As time goes on and you improve on how to sell final expense, your net income will improve likewise.
The beauty of learning how to sell final expense is that you can scale your business very easy and essentially maintain your ratios. You can certainly sell fifteen, twenty leads a week. Or you can scale up, doubling your efforts while doubling your income. Once you dial in to the system and become accustomed to the program, to make more, you simply DO MORE. There are final expense agents greater than $200,000 a year and more, because they outwork and outperform compared to other agents.
I had this realization about a year ago. I was running fifteen, twenty final expense appointments consistently. I was closing $4,000 to $4500 a week in premium. I had the epiphany that all I needed to do to make more money was to double up my final expense lead flow and final expense appointments. It was initially scary to scale up that much in lead investment and lead flow.
If you want to run twenty-five, thirty-five, even forty appointments a week and still have a two-day weekend, you can do it in the final expense business. And you can make a quarter million a year, ONLY if you work hard and learn from someone else who's learned how to sell final expense successfully, as well.
This is why I say final expense is truly a hard worker's profession. You don't have to be a genius to sell this stuff. Even a caveman can do it! All you have to do is just work hard. Get out there and see the people, and dial into a system to make it happen.
Take note how you can make small adjustments in your numbers to dramatically improve results. What if you improve your closing ratio by 5%? Going from five to six cases a week sold will make a dramatic difference in your profitability. If ten to twelve cases closed a week off of 40 leads weekly; that will make a huge difference in your income. Or increasing leads, improving the case size, what if you can squeeze $5 per month more on average out of a sale?
There are final expense sales strategies you can do that make a huge difference. But the biggest point is that it's not all about your commission rates. Leads, closing ratios, the quality of training you receive on learning how to sell final expense. The intangible factors make a tremendous difference.
Let's conclude with a few takeaway points in the final expense business:
- Take your time to fully understand the numbers before learning how to sell final expense. Review this write-up and watch my video about the final expense numbers and really get a good grasp of what the averages are that have been presented.
- Understand that you must pay to play to succeed in a final expense sales career. You need to be ready and willing to invest money into your business to succeed. The truth is, most businesses require substantially more money to invest in their business before they even open up shop, versus learning how to sell final expense. All you need to do is cue up the lead order for four or five weeks and you're in business.
- Final expense is simple, but it isn't easy. And consider the value of exchanging your initial commission levels, in the beginning, for a veteran to train you who will help you to get to the higher commission levels because of your talent and commitment to the business. I believe final expense training is crucial in this business and I am always looking for people who value mentorship, that like the ideas and some of this business but understand they've got to pay their dues. That's a fundamental component as well and working with me will help you succeed in learning how to sell final expense and to avoid the common final expense agency pitfalls and scams many new agents succumb to.