How to Effectively Manage Cash Flow for Your Life Insurance Business

As they say, “It takes money to make money.”

You need leads to generate enough income to pay your bills, but if you don’t already have a steady stream of income, you can’t invest in lead generating endeavors.

It’s a catch 22.

Then there’s the added pressure on life insurance agents.

Unlike other businesses, you aren’t paid when you make a “sale.” You’re paid after you’ve successfully sold a policy, which can take up to 60 days or more.

Not only do you have to focus on creating leads on a constant basis, you also have to plan out your money more carefully, because when you do sell, you’re not receiving an immediate paycheck.

This means life insurance agents have to work smarter to overcome these cash flow obstacles.

But the good news is that it’s not impossible to learn how to manage your cash flow.

You just have to set up your business the right way, track your spending carefully, invest in the right lead-generating ideas, and take advantage of the unique position you’re in.

Here’s how.

Free download: How to Develop a Cash Flow Budget

Starting with Good Cash Flow Management

When you’re starting your business, you have to find a way to pay your bills in the early stages while you work to build up your sales funnel.

We almost always recommend that life insurance agents buy leads to start, with the caveat that they also build a website that will generate leads on its own.

But again, you run into the issue of money: you need cash to build a decent website and to buy leads. So where is that cash coming from?

We often suggest that life insurance agents get a business credit card to invest in building up their leads, paying it off every month as their business grows.

A business credit card gives you at least 30 extra days of cash flow, which can mean all the difference when you’re starting out.

But you have to be sure that you’re tracking that money carefully, and not spending it on things that don’t actually grow your business.

It’s wiser to invest in creating a website that will work to grow your business or to buy leads that will tide you over in the meantime, and not just on office supplies or miscellaneous expenses.

Don’t eat all of your money. Reinvest into lead generation. Click To Tweet

Tracking Expenses Like It’s Your Job

It’s also incredibly important for agents to track expenses. You’re not an accountant, but you need to think like one.

You want to invest in good accounting software that makes it easy for you to manage your cash flow. We often recommend QuickBooks, but any accounting software that helps you manage money will do.

You want to track every lead you purchase, all of your marketing expenses, as well as your state license purchases, commissions, and any other money coming in and out of your business.

Some other key metrics you should regularly monitor include:

  • Bank balances – Cash in the bank is important, but it is just one of numerous components to consider when looking at the full flow of cash.
  • Payables – Pay close attention to what you owe. If you pay your bills sooner than you need to, you might risk leaving your business short of cash. However, paying too late could result in penalties and possibly hurt your relationship with vendors.
  • Credit terms – Watch your credit limits closely to ensure that you don’t overspend, and that you’re getting the best deal possible with your bank.

If you’re not managing your accounts, you won’t be able to see where your cash is going, if it’s being invested properly, or where you’re underperforming.

Managing your cash flow with accounting software will help you make better marketing decisions.

But what happens if you’re managing your cash flow regularly but there’s still too much a delay between when you get a lead and when you get paid for a sale to that lead?

There are a few things you can do to help improve your cash flow, including getting advances on commissions, as well as revising your offerings to improve your actual sales.

Getting Advances on Your Commissions

There will be times in your business when you just need cash, whether it’s to pay for expenses or to reinvest by purchasing ads or other things that market your website.

You can get “cash now” through a financing arrangement.

Financing arrangements are meant to subsidize the amount of money that an agent makes from commissions, while they build their book of business to a sustainable level of income.

They typically take the form of commission advances, which is like a loan made by the life insurance company to the agent in anticipation of future commissions.

Advances must be paid back, and usually are paid back through future commissions earned, but they’re designed to give enough leeway to the agent to grow in the first few years.

If you absolutely need cash in order to build your sales funnel, focus on companies that offer advances so that you have enough time to achieve sustainable cash flow in the meantime.

Working with Non-Med Carriers

You can also boost your cash flow by offering life insurance policies that can be processed faster. The faster the policy is approved, the faster you get paid.

This often means working with non-med (non-exam) carriers – those that don’t require a medical examination in order to approve the policy.

Someone who applies for non-med coverage may have his or her policy approved in as little as 48 hours – or possibly even sooner.

Every year, there are more life insurance products with no medical exam entering the market, and people are signing up for non-med policies in growing numbers, even when presented with traditionally underwritten alternatives.

There can be several reasons that someone might purchase a non-med policy, including:

  • They need immediate coverage – They may need coverage before they go on a trip or to quickly secure a loan. Others just want to get this off their mind immediately and use it as a placeholder until they make the time to qualify for a traditional (and less expensive) policy, and so on
  • They haven’t seen a doctor in years – If someone is unsure about their health situation, securing non-exam life insurance before applying for traditional coverage gives some peace of mind that no matter what happens, they will be covered
  • They don’t want to see a doctor – Some people may not want to see a doctor or have anxiety about being poked and prodded during a medical exam, but want to know they will be covered in case their health takes a turn

Whatever the reason, there are plenty of potential buyers on the market looking for more immediate coverage who don’t mind the expense of a non-med policy.

Working with them to get faster coverage can also help you get paid faster, giving you more cash flow to work with as you continue to sell.

Learn the top products out there on the market when it comes to non-med life insurance, know their application systems, and always bring it up as an option if it makes sense for the client.

(For a list of the top non-med life insurance products Internet agents are writing, click here.)

Manage your cash flow better with this short budgeting guide

Final Thoughts

Your goal is to generate enough steady income from your sales funnel to supply your marketing efforts and pay all of your bills. But if you’re starting out, that initial cash flow can be hard to come by.

Start by setting up a business account and getting a business credit card to give you some purchasing power from the get go. Use that to invest in buying leads and creating an online sales funnel to organically grow your business (this may include buying ads and other marketing efforts, too).

Invest in some accounting software that will help you manage these expenses and show you where your marketing efforts are paying off and where they’re falling short.

If you need a more immediate paycheck, consider working with carriers that offer advances on commissions and working with non-med carriers that can pay you sooner for their policies.

Just remember that in the end, you want to be generating your own leads. So reinvest that cash back into your business wherever possible.