You've finally gotten your insurance license. You're ready to get out there. But have you already thought about what, exactly, you will sell? There are a lot of products you can offer, but it pays to focus on one first. Insurance plans targeted to the senior market, for instance, are hot business right now. So, selling Medicare Supplement insurance plans or final expense policies can get your career off to a great start.
Tapping the Senior Market as a Junior Agent
You probably heard it in the news: 10,000 Baby Boomers are turning 65 every day, and the trend will continue for the next 11 years. Many employers, however, have dropped their retiree health plans, forcing a large population of seniors to rely on the private market to pay for medical expenses that Medicare can't cover.
This is where you come in. Choose to sell Medicare Supplement plans, and you can serve 10,000 potential customers each day.
Healthcare costs aren't the only thing that seniors worry about, though. Many of them also consider final expense insurance to take the financial burden of covering their end-of-life expenses off their loved ones.
Focus on selling final expense plans, and you'll help seniors spend their golden years without worrying about money, while simultaneously getting sales to support yourself financially. It's a win-win scenario.
Undeniably, tapping the senior market is a smart way to begin a rewarding career in insurance. But selling insurance isn't a one-and-done deal; it's more about building a lifelong relationship with a client. With such responsibility, it's best to focus on a single aspect or product if you're new to the business.
Don't be too eager to cross-sell. Racking up commissions will be worthless if you lose customers along the way because of poor customer service.
Pro Tip: Get familiar and comfortable with one product first. This way, you can provide the highest quality of service to every client who comes your way. You can enjoy residual income from insurance renewal anyway.
But, which insurance plan for the senior market should you focus on?
Medicare Supplement insurance and final expense plans can both help jumpstart your insurance career. Here is what they have in common.
- 1Both products benefit from a constant supply of potential clients.
- 2Both products have fast sales cycles.
- 3Both can be sold over the phone or in person.
- 4Both have plan options that can be confusing for the consumer; enabling you to be THE CONSULTANT.
- 5Both can be lucrative for agents with a consistent lead source.
Now we'll cover some of the differences.
Which Pays More: Medicare Supplements or Final Expense?
We get it: commissions are a big deal for insurance agents. Unless you're a captive agent in a company that doesn't pay commissions, your earnings depend entirely on immediate and residual commissions
So, it's important to know which of the two products, Medicare Supplement or final expense insurance. pays more.
Let's Look At Final Expense First
After selling a plan, you'll get an immediate commission for the first year your client pays the premium. The average commission for that is 110 percent. After the first year, you'll receive residual commissions but on a much lower rate, which is often only 6 percent per year.
Say, you sell final expense insurance with a monthly premium of $50 (the average rate). The total annual premium cost of your client is $600. With a 110 percent commission for the first year, you'll earn $660.
Once the first year is done, you'll earn around 6 percent in residual commissions annually. So if your client pays $600 for the annual premium, you'll get $36 as a residual income every succeeding year, up to 10 years after the policy is sold.
Pro Tip: In short, you'll earn $660 per policy for your first year, and $36 in residual income for 10 years selling Final Expense.
Now, What Does Medicare Supplement Commission Look Like?
On the other hand, selling Medicare Supplement insurance plans comes with around a 20 percent commission of the first year's premium. That rate is significantly lower than the immediate commission rate of final expense.
But here's the thing: that rate stays the same for the succeeding annual commissions, up to six years after the policy is sold. Then you continue to get residual commission just at a reduced rate at around 4 - 6 percent. Plus, Medicare Supplement plans cost over two to three times than the average final expense plan premium.
On average, a client who signed up for a Medicare Supplement policy has to pay $175 of premium every month, $2100 for the entire year. With 20 percent commission, you'll earn $420 after the first year, which you can quickly get in the form of an advance payment. For each of the succeeding years, you'll receive $420 as residual commission. That is way higher than what you'll likely earn ($36) as a residual income for a typical final expense policy.
In addition, you can re-shop your client's supplement plan every two to five years if their health is in good condition. This way, you help them keep their premiums low. On your part, this means you get to restart the commission schedule; you'll have more annual residual commissions to enjoy.
Pro Tip: TL;DR You'll earn $420 per policy for the first year, and another $420 in residual income per year for up to six years selling Medicare Supplements.
Which is Easier to Master?
Aside from earning commissions, you should also think of the learning curve involved in selling final expense or Medical Supplement plans. The faster you can master the product, the quicker you make more sales.
Learning and Mastering Final Expense
Selling Final expense life insurance plans is relatively easier since these plans are straightforward. The death benefit from one's life insurance is usually meant to support the family's living expenses after the policyholder has passed. That benefit may not be enough to cover end-of-life expenses. If you pass away, the final expense life insurance plan covers the funeral, burial, and other end-of-life expenses, taking the financial pressure off your bereaved family. The arrangement may only differ if, for instance, the insured has a term plan or doesn't have first-day coverage.
Final expense plans with first-day coverage deliver 100 percent payout even if the senior had only paid a single month of premium. But those without such coverage usually delivers lower benefits.
Because the product is simple, your selling process becomes quicker, unlike traditional life insurance policies that may need more than an hour's worth of explanation. Final expense plans require a presentation of about 30 minutes to one hours. This gives you more time for queries and clarifications.
The leniency of the medical requirements also makes it easier for you to convince your customers to make a purchase.
If learning final expense plans is as easy as pie, mastering Medicare Supplement plans is like going through a maze; there are multiple entrances and exits, as well as various choices of paths and directions.
Learning and Mastering Medicare Supplements
For starters, the Medicare system, alone, is pretty confusing, as the Original Medicare parts are named after alphabet letters (Part A, B, C, and D). The same goes for supplemental plans (Plan A, B, C, D, F, G, K, L, M, and N). It's easy to get all these letters jumbled.
So, as an insurance agent, you need to master the differences of these letters and simplify them for seniors who may find these details confusing.
Also, make sure to learn which supplement plan covers which deductible/copayment in what Original Medicare part. For example, Medicare Supplement Plan D covers Original Medicare Part A deductible, but not Part B deductible. Supplement Plan K only covers 50 percent of Medicare Part B Coinsurance, while Plan L offers 75 percent coverage for the same part.
With four Original Medicare parts and 11 plans that fill various gaps on every part to think about, mastering Medicare Supplement can be a handful. Undeniably, it's easier to learn final expense plans.
Pro Tip: However, you won’t need to learn all plans to begin with. You’ll only need to understand plans F, G, and N.
Which Has a Better Sales Environment?
Another factor when choosing between selling Final Expense and Medicare Supplement plans is to know which of these two has the selling environment that fits your personality. If you plan to market over the phone or via the internet, the environment is usually your agency office, home, or a co-working space. But if you wish to sell face-to-face, you may have to go to places that aren't exactly comfortable for you.
To give you an idea, here are the typical buyer personas between the two products:
Final Expense Buyers.
- Lower-income individuals who failed to include end-of-life expenses in their retirement savings or didn't get a permanent life insurance plan when they were younger and more affordable.
- Individuals who live in more urban areas that can be unpleasant to visit.
Medicare Supplement Buyers.
- Individuals with middle to high income, who are willing to spend around $2,000 a year in an insurance plan that will help them cover out-of-pocket expenses for Medicare.
- Individuals who live in suburban or rural areas where hospital networks are sparsely located.
Apart from the actual environment you'll be in when you sell these plans, you should also think about the type of conversation you'd have in client meetings. For one, you'll probably talk about health conditions and Medicare information, but for the other, you'll likely mention the word "funeral" numerous times.
Talking to people about death, asking whether they prefer cremation over a traditional burial isn't exactly everyday conversation. So if you're considering selling final expense plans, make sure you're up for such topics, given that you are new to the business and haven't met a lot of different types of clients yet.
Which is Less Taxing to Sell?
You're in sales, so keeping up with too many client meetings and answering lots of calls about the most random questions about insurance is just another day at the office. But if you can pick a product that is less taxing to sell than others, that can be a great option, especially since you're still learning the ropes.
If you're leaning to selling Medicare Supplements, take note that the complexities of the Medicare system, including continual updates, can pose a challenge to keeping your clients happy, specifically on the first year of premiums. Make sure to address their questions and concerns promptly.
Pro Tip: Remember, selling insurance is all about building long-term relationships with clients. If you keep them satisfied throughout the first year, you'll likely get their loyalty and be rewarded with high earnings through renewals and re-shopping.
With final expense plans, you don't have to worry about a lot of changes and complexities. But this doesn't mean you no longer need to exert extra effort on your customer service. If anything, you have to be a hands-on agent, as keeping lower-income seniors on track with their payments can be a challenge.
As a final expense insurance agent, you can incur chargebacks if your client’s policy lapses within the first year. The insurance company will revoke the entire first year's premium, including your commissions.
Say, your client’s policy lapsed five months in, and the insurance company gave you a 12-month advance, you'd have to pay back the seven months of the commission that were advanced to you.
After the first year, you'll be clear from any chargeback. But no matter the year, make sure your client settles their payments monthly. Help them stick to their goal of taking the financial burden of covering end-of-life expenses off their loved ones.
So, Which You Should Sell — Final Expense or Medicare Supplement?
As discussed, there are too many variables and personal preferences involved in making a choice between Medicare Supplement plans and Final Expense insurance.
If you're up for the challenge of mastering a number of plan options, finding one that best suits your client's needs, and simplifying complex details to seniors, you may be fit to begin your insurance career with Medicare Supplements.
If you want to break into the senior market with a simple, straightforward insurance product, final expense is a good option.
Just be prepared for a possibly not-so-stellar sales environment and clients who find it challenging to stick to their monthly payments.
Your earning potential is not as lucrative as it could be selling Medical Supplement plans, but you can cross-sell supplements or Medicare Advantage Plans once you get a better grasp of the business.
The bottom line is this: know which product will help you meet your long-term business goals. And in case you need more guidance, TR King Insurance Marketing is here to help you navigate through your career.
Partner with TR King Insurance Marketing
Now that you're at the first stop of your insurance career journey, let us help you acclimate to the business and prepare you for the next stop. With our top-quality insurance products, we will not only help you choose between Medicare Supplement and final expense plans but also get you started on selling it. Our team also provides excellent support and training programs, equipping you with the skills you need to serve the senior market proficiently, build lifelong relationships with clients, and enjoy high earnings.Ready to get out there? Let's put your insurance license to work. Give us a call today to get started.
Key Takeaways In This Article
- Know your differences between final expense insurance and medicare supplements.
- Be honest with yourself about the selling environment you fit best.
- Understand which product will help you met long term business goals.
Over to You
We'd love to hear your thoughts in the comments below on:
- Which product did you decide to sell, final expense or medicare supplements?
- Which product do you cross sell the most?
If you have any questions, please leave a comment below. We will carefully read each one of them. Happy Selling!