Is selling Life Insurance a Pyramid Scheme?
People think about this question when they consider the option of life Insurance. They wonder if it is a pyramid scheme or not.
NO, life insurance policies are not considered a Pyramid Scheme because they do not force you to recruit people into the company from which you make money. ”In the Pyramid Scheme, participants should recruit others into the scheme to earn money. Life insurance is a risk management product that protects the policyholder financially in case of insured premature death. It gives protection during the financial hardships due to the sudden or expected death. Life insurance products cover all types of risks and can be affordable. Pyramid schemes are illegal businesses that get money by recruiting new people and services and selling goods to the public.
The basic difference between Life Insurance VS Pyramid Scheme:
A pyramid scheme is illegal all over the world. But life insurance schemes are not. Pyramid schemes are illegal because they have a network of people involved. Each of them pays to get the person ahead at the top to get paid, hence called a Pyramid Scheme.
We all know about the difference between pyramid schemes and life insurance schemes, but they are two different types of financial products.
A life insurance scheme is a good type of investment in which an investor pays a specific amount every month. In the end, a family of investors gets a particular amount of money according to his Investments. But in a pyramid scheme, you have to pay someone else investment. As your return, get someone else money which is not an investment.
- Life insurance schemes are policies that cover the financial needs of people if they die with inadequate financial resources. But pyramid schemes are criminal organizations based on a hierarchical structure. In a pyramid scheme, new entrants will use the scheme’s money to pay earlier entrants. They ensure that their investments will give high returns.
- Life insurance will have legal status in the US, while pyramid schemes are illegal. Both aim for financial stability, but both don’t give any guarantee to deliver success.
How to identify that the insurance company is a Pyramid Scheme?
Insurance companies are not pyramid schemes, but some companies develop pyramid schemes. So how do we indicate that this insurance company has a pyramid scheme?
1. Recruitment overproduction
If a program emphasizes recruiting others to join free, it is a pyramid scheme. Be curious if you will receive more payment for recruiting others than product sales.
2. High returns in a short period
They promise high revenue from recruiting money instead of income generated through product sales.
3. Benefits of selling Life Insurance
Selling life insurance is quite hard, and it isn’t easy to sustain a long-lasting career. If you start your job with a renowned company, it’s easy to achieve your goals early in life.
4. Job expectations
The career of a life insurance agent is very easy compared to other finance careers. This job requires less education as compared to others. If you want to get a job in an insurance company, you only need a diploma. Health insurance is very high nowadays. Insurance companies offer appointments to everyone interested in the job.
5. High salary potential
Usually, there are the largest commissions in life insurance companies. It depends on the agent, selling which type of commission. Life insurance agents get a specific percentage of the policy and receive a commission each time the procedure will renew.
6. Continuous Commission
The best thing about the life insurance policy commission is that it will not bind your sale to the first year. The policy will renew every year, and you will be paid until the insurance policy is active. You are earning maybe 5-10 per cent as long as the policyholder pays to the company.
What Difficulties Can Be Faced By Life Insurance Agents?
Life insurance agents face many hurdles in their career. Some of them are as below:
1. Salary is based on commission
The biggest disadvantage of being a life insurance agent is declaring their agents as Independent Contractors. Their salaries depend on the insurance they sell. If you cannot make sales, you will go without a paycheck.
2. Customer’s Investments
Nowadays, it’s hard to find new chances because there are a lot of health insurance companies that offer very lucrative policies. It is an important part of health insurance where you have to find new possibilities because of high competition. So if you will not be able to find new options, it will affect your monthly income.
3. Sale Processes
Selling life insurance is a very difficult process. If you find a qualified life insurance prospect, it does not reflect that you have an easy sell. You have to create urgency so that the insurance policy sells right away. Creating urgency is difficult because life insurance does not give instant satisfaction to customers.
Can Life Insurance Schemes Sell Worldwide?
Yes, life insurance companies can sell their schemes to any country of the world because:
- Insufficient number of trained people who can sell their life insurance policies.
- Inadequate amount of banks and financial institutions that help people cover their insurance needs.
- Adequate funds to provide shelter and food to people because of overpopulation.
The misconception about life insurance in some countries is that they do not think they can buy a life insurance policy because of insufficient money and health conditions. Understand the people’s traditions and local culture to sell your life insurance schemes. Selling them what they want, not what they need, helps them sell their schemes worldwide. So, yes, you can sell these policies worldwide.
The career of a life insurance agent is very hard, and most of them usually do not spend a year in this business. Selling life insurance is not a pyramid scheme because insurance companies might fit the criteria for a pyramid scheme; however, they are not MLM companies. By completing at least five years in the insurance company, you will surely be rewarded with massive commissions.