Why Financial Advisors Sell Life Insurance: Planning, Protection, and Practical Trade-Offs
Life insurance as a common building block in financial planning
Life insurance plays an important part in financial planning, even though some clients are uneasy when a financial advisor also sells policies. Many people expect an advisor to act as an “untouchable fiduciary” working solely on the client’s behalf, so the idea of an advisor earning money from insurance sales can feel incompatible with that role. In practice, however, most financial advisors wear multiple hats, and a life insurance policy can have a place in almost any serious financial plan.
The key issue is not whether life insurance belongs in financial planning—it often does—but how it is introduced, how it is selected, and how the advisor’s incentives are managed. Advisors may include life insurance to provide more comprehensive wealth planning services, to meet client needs that go beyond investments, and, in some cases, to earn commissions. At the same time, the topic can be difficult to raise, and it requires expertise that not every investment-focused professional has developed.
Why clients may be suspicious—and why advisors still raise the topic
Some clients view financial advisors who sell life insurance with suspicion because they assume the advisor’s recommendations could be influenced by compensation. That suspicion can be heightened when the conversation shifts from stocks, mutual funds, and portfolio strategy to a product that is sold through an application process and underwriting.
Despite that tension, advisors often raise life insurance because it connects directly to wealth protection and estate planning. Investment strategies can be carefully designed, but they may not address a central risk: the financial disruption that can follow an unexpected death. For many households, the loss of an income earner can create immediate hardship for dependents, even if the long-term retirement plan looks strong on paper.
In that sense, life insurance is frequently discussed not as an “extra” product, but as a tool to protect a plan that is already in place. When a client’s sudden loss of life would mean hardship for dependents, life insurance becomes part of the broader effort to maintain stability.
Common situations where life insurance can matter
Most people have a legitimate need for a life insurance policy, though the type of policy and the amount of coverage depend on the family situation. Financial advisors who have already established a trusted relationship with clients are often in a strong position to explore these questions as part of the client’s overall wealth planning process.
One typical reason for life insurance is to protect a partner’s living standard when one partner earns more than the other. In that case, the goal may be to ensure that the surviving partner can keep the same lifestyle and handle large obligations without being forced into major changes.
Covering major debts and future expenses. A policy may be sized to cover an outstanding mortgage and anticipated college expenses for children.
Replacing income over time. Some families aim to provide an income-generating nest egg that supplements a surviving partner’s smaller paycheck until retirement and beyond.
Providing long-term security for dependents with special needs. Securing the future of grown children with disabilities is another case in which life insurance can be a crucial part of the plan.
The underlying idea is straightforward: if the sudden loss of life would create hardship for dependents, it is reasonable to consider life insurance. Without that protection, even a clever 401(k) portfolio strategy may not prevent a surviving spouse from having to make painful decisions, such as leaving a home that becomes unaffordable after the main contributor passes away.
Why advisors may choose to sell life insurance themselves
There are several reasons financial advisors might consider selling life insurance as part of the services they offer. One is the desire to meet client needs through more comprehensive wealth planning. If an advisor is already helping a client think through goals, risks, and long-term security, insurance can naturally become part of the conversation.
Another reason is practical: selling life insurance can create an additional revenue stream. For advisors who make a living through commissions, there is a strong financial incentive to include insurance products, especially when insurers pay relatively well for selling policies.
Compensation structures can vary, but one example described is an initial commission that can be a sizeable portion of the first year’s premium, followed by ongoing commissions of about 3% to 5% per year as long as the policy remains in effect. This can make insurance sales attractive to advisors whose business model includes commission-based income.
The challenges: sensitive conversations and underwriting outcomes
Even when insurance is clearly relevant, raising the subject can be difficult. Some clients may react with distrust, and others may recoil at the morbidity of discussing death. An advisor who is comfortable talking about markets and retirement projections may find it harder to introduce a conversation that requires clients to imagine worst-case scenarios.
There is also a practical risk: a client who agrees to apply for life insurance may be turned down in underwriting for reasons that feel personal or unflattering. The example given is being rejected due to being overweight. A client who feels insulted or embarrassed by that outcome may lose trust and decide to take their business elsewhere.
Because of these dynamics, some advisors prefer to focus on investments and leave insurance planning behind. It can feel simpler to stay within the familiar territory of portfolio construction and investment strategy rather than navigate emotionally charged discussions and the possibility of an application that does not go as hoped.
Becoming qualified: adding insurance expertise to an advisory practice
For advisors who do choose to sell life insurance, adding “insurance agent” to their list of qualifications may be relatively straightforward because the barrier to entry can be low. However, there is still a meaningful difference between being able to sell a product and being able to advise confidently on it.
Obtaining formal qualifications can be worth the extra time and effort. Examples of credentials mentioned include becoming a Chartered Life Underwriter (CLU), a Certified Insurance Counselor, or a Fellow at Life Management Institute. These qualifications can help ensure that advisors are comfortable with the details of the product, reducing the chance of embarrassing moments when clients ask unexpected questions.
Credentials can also signal seriousness to more sophisticated clients. In an area where trust and technical knowledge both matter, demonstrating competence can be important, especially when clients are already aware that commissions may be involved.
An alternative model: partnering with an insurance professional
Not every advisor wants to sell insurance directly. Another approach is to complete the wealth planning work and then pass the insurance portion to an insurance professional. This model can appeal to advisors who prefer to remain focused on investment strategy or who want to avoid the potential relationship strain that can come from underwriting outcomes.
This handoff approach has multiple advantages:
Reducing emotional blowback. If an application is rejected, the client’s frustration may be directed less at the financial advisor who recommended exploring coverage and more toward the process itself, since the insurance professional is handling the application.
Allowing specialization. The advisor can focus on investments and planning, while the insurance expert focuses on insurance planning and product specifics.
Creating productive partnerships. A relationship between a fee-only financial advisor and an insurance representative can create synergies through reciprocal leads.
The reciprocal lead dynamic can work in both directions. A fee-only advisor who does not want to go through the qualification process to sell insurance can still help clients get coverage by connecting them with an insurance representative. At the same time, the insurance representative may have clients who need financial advice. Each professional can benefit by referring clients to the other, potentially generating ongoing business for both.
Balancing duty, profit, and client needs
When an advisor includes life insurance in an overall strategy, the motivation can be duty, profit, or a combination of both. From a client’s perspective, what matters is that the recommendation fits the client’s circumstances and is explained clearly. Life insurance is often presented as part of wealth protection and estate planning, especially when dependents would face hardship after a death.
At the same time, clients are not wrong to notice that commissions can be involved. The existence of commissions does not automatically mean the advice is inappropriate, but it can raise questions about how products are selected and whether alternatives were considered. This is one reason why some advisors emphasize credentials, transparency, and careful communication when they decide to sell insurance themselves.
For clients, the most practical takeaway is that life insurance is frequently integrated into financial planning because it addresses a risk that investments alone may not cover. For advisors, the takeaway is that selling life insurance can expand the scope of service and revenue, but it also introduces challenges: sensitive conversations, underwriting uncertainty, and the responsibility to understand the product thoroughly.
Where life insurance fits in a broader plan
In many households, the question is not whether to build wealth, but how to protect it. Life insurance is commonly discussed in that context. It can be used to help keep a surviving partner in the family home, cover large obligations like a mortgage, and support children’s future needs. It can also be part of planning for dependents who may require long-term support.
Because these needs are closely tied to a family’s real-life circumstances, the advisor-client relationship matters. Advisors who have established trust may be better positioned to ask the necessary questions and frame life insurance as a practical tool rather than an uncomfortable sales pitch. Still, the conversation requires care, and the advisor must be prepared for the possibility that the application process may not go smoothly.
Whether an advisor sells life insurance directly, earns commissions, pursues additional qualifications, or partners with an insurance professional, the underlying goal remains the same: aligning coverage decisions with the client’s broader wealth planning strategy, so that financial plans are not derailed by a single, devastating event.
Key points to remember
Life insurance can be a meaningful part of financial planning, especially for households with dependents who would face hardship after a death.
Clients may be skeptical when advisors sell insurance, but many advisors wear multiple hats and include insurance as part of comprehensive planning.
Advisors may sell life insurance to better meet client needs and to earn commissions, which can include a large first-year commission and ongoing annual commissions while the policy stays in effect.
Discussing life insurance can be difficult, and underwriting outcomes can create tension if an application is rejected for personal reasons.
Advisors can pursue formal credentials to strengthen expertise, or they can refer clients to insurance professionals and build reciprocal partnerships.