How to become an insurance agent is about the logistical steps you need to take to start your career in selling insurance. It is a step-by-step guide to the tests, licenses, certifications, and forms required.
After you read this dry, but very helpful article, please read this one next: Selling Insurance – How to Get Started. That article is more of the heart and soul of how to start actually selling insurance. It will help you to create a strong foundation for your sales career.
Then, please visit our Broker University for more helpful articles to bring your career to the next level.
Step One: Decide What You Want to Sell
When you are first starting off in insurance, you will want to concentrate on selling in a specific area. Selling all types of insurance to all types of people and/or businesses is not feasible. There are just too many different parts to each kind of insurance. Moreover, there are way too many licenses to hold, carriers to contract with, and certifications to complete for all the different products.
After you get the hang of one product, you can certainly branch out. However, staying focused on one niche is the best way to maximize your limited time and resources.
Insurance Lines You can Sell
Here are the main lines of insurance agents sell.
- Workers’ Compensation Insurance: We may be partial to this line as it is our specialty. However, when you sell workers comp to businesses with hard-to-place class codes, like here at Foresight Commercial Insurance, you can make great money and really make a difference in your clients’ businesses.
- Other Business Insurance: P&C, L&H Keyperson, Group L&H Policies
- Property & Casualty: Automotive, Homeowner, Renters, Umbrella, Motorcycle, Boat, Trailer, etc.
- Life Insurance: Term, Whole (Traditional, IUL, Final expense, Children’s Whole Life, etc.), Disability
- Health: Medicare Supplements, Medicare Advantage, Critical Illness, Health, Dental, Eye, etc.
There are others, but that list is a good place to start.
Being Captive or an Independent Insurance Agent
Once you have an idea of what you want to sell, you will need to decide between being captive or independent.
What is a Captive Insurance Agent?
A captive agent works for one insurance company and exclusively sells their products. That company trains the agent on their suite of insurance products. The insurance company (or carrier) often pays a captive agent a base salary. Plus, they typically get commissions on top of their base pay. These commissions can be reoccurring or paid in one time bonuses, depending on the contract.
Benefits of Being a Captive Agent
The benefits to being a captive agent often include:
- Access to benefits (such as paid time off, health insurance and 401k retirement plans)
- Base salaries to subsidize commission pay
- Dedicated support systems (for training, compliance and management).
- Bonuses in the form of cash, prizes or trips for sales contests
- In addition, captive agents are often W-2’d employees. This means that the carrier they work for will pay their employer shared and withheld taxes directly to the government.
What is an Independent Insurance Agent?
An independent insurance agent is an entrepreneur who works for themselves and can represent many different insurance companies. However, even though they are independent, they are often affiliated with an “upline”, an agency or brokerage, and/or an Insurance Marketing Organization (IMO).
These agencies, uplines and IMOs will likely offer independent agents support and training. In exchange, they will get an “override” on what their contracted agents sell. This means, they also get paid by insurance carriers when their agents make sales. Also, they may help with compliance, and they will typically hold contracts with carriers for the agents. However, they usually do not offer salaries, paid expenses or benefits, such as health insurance or retirement savings.
Insurance companies pay independent insurance agents directly. As an independent agent, you would get commission statements and payments each month. Then, at the end of the year, you would get a 1099 tax form from each insurance carrier that you sold for that year. You are then responsible for paying self-employment taxes to the government quarterly.
Benefits of Being an Independent Agent
The benefits to being an independent agent include:
- Being your own boss
- Having the freedom to work as much as you want
- Higher commission levels (than captive agents) to work towards
- Freedom to work with multiple insurance carriers to offer the best selection of products to clients
- Being a consulting expert on many products, rather than a salesperson pushing one product
- Bonuses from multiple carrier contests including: incentive trips, cash and other prizes
In summary, being an independent agent usually means more money and freedom, but at the expense of base pay and benefits.
How to Become a Licensed Insurance Agent
Once you decide what kind of agent you want to be, and what lines of insurance you want to sell, you will need to become licensed in each state you want to sell insurance in.
Each state has different fees, forms and requirements for selling insurance. However, you will only have to test in your primary state. You will pay for a primary state license for each line or insurance you sell. Then, if you want to sell in other states, you will get an out-of-state license called a non-resident license. You have to do this in each individual state you want to sell in. Typically, these non-resident licenses have annual fees of around $50 (with some higher, and some lower).
State Insurance Licensing Information
So, where to start? If you are looking for information on getting an insurance license in your home state, and/or in a non-resident additional state, start with the National Insurance Producer Registry. (NIPR is an online tool for licensing. States use it to make their license process streamlined and accessible online. They do charge a fee for using the service, but it is worth it to do it all online, and in most cases, you might not have a choice. At this time, there are still mail in options available if you would rather write a check.)
To find first-time licensing information and requirements for your state:
- First, go to the State Licensing Page here: https://nipr.com/licensing-center/state-requirements
- Choose the drop down for “First Time License / New License / Line of Authority”
- Then, pick your state from the next drop down, and pick “I am a Resident”
- Choose the “Producer / Other” from the “Are you an Insurance Producer or Insurance Adjuster?” drop down.
- Finally, pick “Individual” for “Identify Licensee.”
On the next page, you will see (Under the large box that holds the “Apply Now” button) expandable information for Fees, Lines of Authority, and Rules and Requirements.
An Example State for Licensing Requirements
Using my state of Nebraska as an example, under the “Lines of Authority” expandable “+”, I can see that a standard, first-time producer license is $50. I can also see which producer licenses require exams (and which ones just require you to pay the fee.) For Nebraska:
|NE Licenses that Require Exams||NE No Exam Licenses|
|Life and Annuities|
Sickness, Accident & Health
Funeral Insurance – Director
Please note that license class names can vary by state.”
Who Can Apply for a License?
If you are over 18, can pass a state background check, can pay the license fee, and can pass a licensing test, that means you can usually apply for an insurance producer license (aka agent license).
State Testing Information
Note, before you can apply for a license, you must first pass a licensing exam! Who doesn’t love a test? Ok, not many people, but you have to take one (or more). Moreover, they are not that bad, but you do have to study to pass them.
Applicant must pass a written examination to determine competence to act as a licensed Producer in the lines of insurance (LOAs) for which such applicant is applying for.https://nipr.com
Finding Your States Testing Information
The NIPR state information page will have a button link at the bottom of the page to your states producer licensing website. (You can also search for it on Google or your favorite search engine.) Each state uses different proctors for taking an exam. So, you will need to see exactly how to sign-up for a test in your state on their website.
For example, in my state, there is one “proctor” of the state licensing exam. The state website provides a link to go to that proctor’s website. There you can sign-up for an exam time, see an outline of what is on the exam, see a practice exam, and find information on test fees, scheduling policies, scoring information and FAQs.
Insurance License Exam Prep
There are study resources for insurance license exams, and I highly recommend you use one. Many of them have reading guides, videos, audio readings and practice quizzes and tests to help you pass. I personally learn best by taking the practice quizzes and test questions over and over. Good exam prep companies will create their questions to be very similar to the real questions. They base their study questions on previous test questions from actual tests.
Online vs. In Person Test Prep
Most test prep is online these days. (Especially, in when I am writing this now in Covid times). I prefer the test prep in online version as you can take it at your own pace (i.e. super-fast!) and complete practice questions as much as you like.
However, I have done an in person test-prep course at one point as well, and I liked it too. If you have a good teacher, you may also learn valuable industry insights as well as test relevant information.
How to Stay Licensed?
Insurance licenses are usually for two years. Then, you will have to pay a renewal fee.
Typically, each state will have requirements for staying licensed and in compliance. You can find these on your individual state information page. (Just choose “Renewal” instead of “First Time License” on the state info page drop down.) Usually, you will need to pay your license renewal fee. (Often, this is around $50.)
In addition to paying a fee, you will also have to complete and report competing Continuing Education (CE) credits. Each state has a certain amount of hours of continuing education they want you to complete every two years. You will have to find a third-party CE provider. You will pay them for classes. Then, take the class, and finally, report your results to the licensing board of your state.
Make sure you know when your license renewal is up, and start the process as early as the state allows to make sure you are compliant and on time.
Find an IMO, Brokerage or an Agency
You can do this step out of order (i.e. you can do it first, if you like). However, you should know what you are going to sell first. Then, even if you plan to be a solo agent, you will need to find a place to help you with contracting with insurance carriers. Solo agents can’t do this directly. You need to find an IMO – Insurance Marketing Organization – or brokerage or an agency to work with.
If you have no connections and no idea of how to find an organization to work with, you can start with an online search for insurance agent organizations (like the IIAB) or search for insurance brokerages in your area that support independent insurance agents.
Independent Agent Story:
“I understand being a “solo-preneur!” When I first ventured into insurance, I did it all alone. I knew of an IMO I wanted to work with. So, I contacted them and they helped me get contracts with the carriers I wanted to work with in my state. It was going okay.
Then, one day my IMO rep called me and said they had an agency that worked with them too that wanted to grow. They wanted to bring in more independent agents (at the same commission level that I was already getting being all by myself). It was a great fit for me! I got support and leads, and that agency became my “upline.” (This means they got an override on my business, just like the IMO got an override from what I sell. This override is paid by the insurance carriers to the agency and the IMO, but not from my commission. So, it was a win-win for everyone.)
It’s going great now, and working with this agency helped me to expand into other lines of business.”
– Carrie S.
Trainings and Certifications on Specific Insurance Products
Next step in becoming a life insurance agent is learning the products and solutions you will be selling. Carriers will have product trainings (both live and online) for you to take advantage of. You will also have resources available to you from your marketing organization. Some products may require you to certify to sell them. (For example, Long-Term Care Insurance.)
The good news is, there are no other certifications you need to start selling basic types of insurance products. However, if you want to sell personal life insurance products tied to the stock market (like variable whole life), then you will need to be FINRA certified as well. (And that’s a whole other article.)
Protecting Yourself and Your Business: E&O Insurance
You are now in insurance, so you should recognize the benefit of insuring your assets. As an insurance agent, you will need to protect yourself from your own Errors & Omissions (E&O). E&O Insurance offers you protection as an agent from lawsuits from your clients.
If someone thinks you made an error in putting together their insurance protection, then they can sue you for damages. You will need a policy in place that not only protects you from suits, but fulfills the requirements insurance carriers have for you to be contracted with them to sell their products. Often, your IMO can find you a deal on E&O insurance.
Conclusions and Next Steps on How to Become an Insurance Agent
After you are trained, licensed, contracted, protected, certified and supported, you are ready to sell!
As suggested at the beginning of this article, your next step should be to jump over to our article on How to Sell Insurance. This is a guide will help you in laying out the foundation of your business and sales career.
Learn more about selling workers’ compensation insurance with Foresight.