If you enjoy working with the public and know how to sell, you may want to become an insurance agent. With low startup costs and lots of flexibility to chart your own course, the work can be highly rewarding.
The insurance business is also fairly resilient against economic downturns and startup requirements are relatively simple.
Although some insurance agents join existing firms, here we will focus on how to become an independent insurance agent, running your own small business.
What does an insurance agent do?
Insurance agents sell insurance policies. However, the job is not simply a sales position. You will work closely with each client to assess risks, find insurance coverage and build relationships that can last a lifetime.
You might specialize in one or more types of insurance, including health, life or business, which is often called property and casualty insurance.
What are the requirements to become an insurance agent?
Every state requires insurance agents to obtain a license, but training requirements vary by state. You may also need to pass a licensure exam, depending on your state and the types of insurance you plan to sell. It’s worth noting that a college degree is not often required to get a license.
Check your state’s requirements for details.
Though more consumers are now turning to online options for obtaining insurance, the Bureau of Labor Statistics estimates that the need for insurance agents will remain strong. Job growth is predicted to be 10% over 10 years, which is higher than many occupations.
For agents working for an agency, the median salary is just over $50,000 nationwide. That amount can fluctuate greatly for independent insurance agents depending on the type of insurance you sell, your location and your clients
How long does it take to become an insurance agent?
Becoming an insurance agent might not take as long as you think. Depending on your state and the insurance products you will sell, you may need up to 40 hours of training. Online courses are widely available, so you could have some flexibility with when and where you complete your training.
You can then take the relevant exam, submit to a background check if required and set up your new business.
Types of insurance agents
There are two basic types of insurance agents:
Captive agents work with a single insurance provider, which is typically a large national company. You are not allowed to sell competitors’ products, and you may be required to sign a non-compete agreement. In exchange, you will receive support and training from the insurance company.
Independent agents, or brokers, work with multiple insurance providers. You will give your clients quotes from different insurers to help them find the right company and policy to meet their needs.
Independent agents have more flexibility, but do not receive much training or support from the insurance companies. This can make it slightly more challenging to get started, but you will have more flexibility with choosing the best options for your clients.
Setting up your insurance business
Once you are licensed, you will need to set up your insurance company, which requires you to choose a business structure. It’s a good idea to consult with a tax professional or a business attorney because your choice will have long-lasting impacts on your company.
The three most common structures for insurance agent businesses are:
A sole proprietorship is the simplest structure for an insurance agent who will not have partners. You can file taxes under your social security number or file for an EIN (employer identification number). Business deductions, profits and losses and your business taxes can be filed with your personal tax return. However, if your business is sued, you may be personally liable.
An LLC (limited liability company) may be the right choice for independent agents who want to limit personal liability or form a partnership with another agent. There is little paperwork, and your business profits and losses simply “pass-through” to the owners’ personal tax returns. An LLC can protect you against personal liability if the company is sued.
S Corporations pay their employees a salary and deduct payroll taxes. Any excess profits can be distributed to the owners as dividends, with a lower tax rate than income. This can be advantageous in some cases. LLCs can make an election with the IRS to become S corporations, though you will have additional paperwork requirements each year. Ask your tax professional if this election makes sense for your business.
There are additional state-specific guidelines for small businesses, as well as IRS requirements. The IRS checklist for starting a business is a valuable resource to ensure that you don’t miss anything. Also, consider working with a startup attorney so your documents are properly filed.
How to find clients for your insurance business
In addition to a business plan, which guides your company’s growth, every organization also needs a marketing plan. Who are your ideal customers — families, corporations, small businesses or a combination of these groups?
Once you decide on a target audience, think about their daily habits. Does that person spend a lot of time on social media? Is she a member of any local clubs or organizations? The better you understand your ideal clients, the easier it will be to determine how best to market to them.
Remember that the insurance business is largely sales, and that you may get a “no” five times before you get a “yes,” so you’ll need to follow up more than once.
It’s helpful to network in your community. Make sure you’re promoting yourself at the places where people who may need your insurance services are. Whenever possible, get prospects to fill out a contact form so you can follow up.
Fliers, business cards, events and TV ads are also great ways to reach prospective clients that are not already in your network.
Avoiding risks and protecting your business
It can be easy to get so caught up in becoming an insurance agent that you don’t consider your own business insurance needs.
Next Insurance offers tailored coverage for insurance agents. One of the most vital types of coverage is errors and omissions insurance. Also known as professional liability, this insurance covers business mistakes, missed deadlines and accusations of professional negligence.
How Next Insurance helps insurance agents
At Next Insurance, we make small business insurance easier than ever with fast coverage, flexibility, competitive rates and instant certificates of insurance. Our 100% online services are backed by top-quality customer support, earning us 4.7 out of 5 stars in customer reviews.
Get your instant quote today to explore options for your business.