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Feb 22, 2022
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Independent insurance agents help customers find the perfect policy fit for their needs while enjoying the flexibility and earning potential that comes from being self-employed. Does this sound like a career that fits you? You just need a little determination and drive, and you’ll be on your way to a successful career as an independent insurance agent.
Before you jump into this exciting career field, here are some things you should know — and a few tips to help you get started.
There are two basic types of insurance agents: captive and independent. Captive agents only sell policies for one insurance carrier, but independent agents — also known as insurance brokers — can contract with several carriers and sell policies for all of them.
Because independent agents aren't bound to one carrier, they can be more competitive in their sales approach. If one specific auto policy from one carrier doesn't fit a prospect's needs, for example, the agent can offer several other options and rates from different carriers. Independent agents also benefit from having a lot of flexibility — they can specialize in one type of coverage or offer several. They can start with just one coverage line and gradually add more as they expand their network and grow their business.
Not every insurance carrier will work with independent agents, but there are quite a few that do. As an independent agent, you'll have no shortage of options for policies to sell.
In many ways, an independent agent's job is similar to a captive agent's job. They seek out leads, make sales calls, build relationships with prospects and clients, and sell policies. Because they aren't selling for only one carrier, though, independent agents spend more time researching and comparing policy options for their clients and prospects.
For instance, say you meet with a new lead who is looking for life insurance. After you thoroughly go over their needs with detailed questions, you would go back to your portfolio of carriers and policies to come up with a few options to offer. You might come back with three policies, each from a different carrier, to present to your prospect. This allows you more freedom to craft the right policy for your customers.
As an independent agent, you'll also typically work as an independent contractor. That means you'll usually need to manage a business rather than simply working for an employer. That includes marketing your business, handling administrative tasks, managing finances, and taking care of your self-employment taxes. This involves more responsibility than working for one insurance company, but it also affords you more opportunities.
Insurance agent compensation can vary widely depending on region and performance. However, independent agents typically earn better commissions than captive agents because the insurance company doesn't have to handle the overhead of employing them. Generally speaking, your salary ceiling is better as an independent agent.
That said, you will need to factor in the costs of running your own business. You'll pay self-employment taxes for Social Security and Medicare, which are twice the rate you'd pay as an employee. You'll also have other overhead, which may include renting an office or paying for home office expenses, hiring staff, marketing, and more.
If running your own business and selling insurance sounds like a good combination for you, then a career as an independent agent might be a good fit. If that describes you, here are nine steps that will get you on your way.
At a minimum, you'll need a high school diploma or GED to become an independent insurance agency. A college education could help you go further, especially if you get a degree in a field like marketing, finance, or business administration. The skills you learn in courses like these will prepare you to run your own business as an insurance agent.
You'll also need to study for your state-specific licensing exams, which we'll discuss in the next section.
To sell insurance, you will need a producer license. A producer is a term referring to anyone who sells insurance products. Obtaining an insurance license will enable you to discuss insurance products knowledgeably with clients and help you make the sale.
Each state has its own insurance licensing requirements, so specific stipulations will vary based on your location. In addition, the type of license or licenses you will need will depend on the types of insurance products you decide to sell. The two most common types of insurance licenses are property and casualty (P&C) and life, health, and accident.
A property and casualty insurance license allows you to sell property and casualty insurance consisting of auto, homeowners, workers' compensation, commercial property, and commercial liability insurance. You will attend a pre-licensing course either online or in a classroom and pass a licensing examination. Then, you will take a licensing exam and apply to your state’s department of insurance for a license.
Obtaining your life, health, and accident license will allow you to sell insurance products related to life events, including life, accident, and health insurance. As with the property and casualty license, you will have to take a pre-licensing course, pass your examination, and apply to your state’s department of insurance for a license.
Here is a helpful resource for insurance producer licensing requirements for all 50 states.
You can also choose to sell personal and commercial insurance or focus on only one or the other. Personal insurance includes your car, home, life, disability, health insurance, etc. Commercial insurance consists of insurance for businesses such as commercial property, general liability, commercial auto, business interruption, workers' compensation insurance, and more.
There's no wrong answer. You will just need to develop a business plan for your agency and decide on your areas of specialty or if you want to provide comprehensive insurance services to individuals, families, and businesses. Think of the time, money, and resources you will need to plan and invest in getting your agency up and running and what type of agency (personal lines, commercial, or both) makes the most sense for you and the people in the area you'll serve.
As an independent insurance agent, you will need agency appointments with insurance companies that sell the types of insurance products you want to offer to your clients. The appointment gives you as an agent the authority to act on the insurance company’s behalf.
If you're a new insurance agent, the best practice is to gain appointments with established carriers who offer multiple lines of coverage and have attractive commissions and opportunities for you to grow as an agent. Then, as you establish yourself, you can add niche carriers who specialize in your target markets, whether it be clubs and restaurants or churches and civic organizations, just to name a few examples.
If you are interested in becoming an independent agent for a specific carrier, you will likely find information on how to become an agent on the carrier’s website. For example, there may be an application to complete or a number to call for more details.
Before appointing you as an agent of the company, insurance carriers will look to see if there is a fit between the products it sells and the target market you are approaching as an agent. The carrier will also consider several other factors, including your agency’s financial stability, business plan, level of automation, and history of carrier appointments.
There are also some things you as an agent need to keep in mind when searching for agency appointments. For example, is the company appointing new agencies? Will you be able to meet its premium quota? Is the insurance company financially sound? You can also check out company ratings through organizations such as AM Best (for financial stability) and J.D. Power (for customer service ratings).
As we've mentioned, marketing is a key part of your job as an independent agent. If you don't put yourself out there, you'll have a hard time selling enough policies to create a sustainable business.
There are countless ways to market yourself and your services. It all starts with your target market, and you can build from there. For instance, if you're selling term life insurance, you'll have a substantially younger clientele than if you're selling Medicare. In the first instance, you might focus your marketing efforts more on social media and other digital channels. In the latter case, you might lean on more traditional methods or word-of-mouth marketing.
An effective marketing plan should incorporate multiple strategies, from mailers to email and more. This should be a significant budget line for your business as an independent insurance agent so you can connect with as many prospects as possible.
The insurance industry is always evolving, and independent agents need to work hard to keep up. New regulatory requirements and legislation can impact your policy offerings. If you're not prepared to answer questions or speak knowledgeably about industry developments, you could miss out on a sale or lose a client. Most states also have continuing education requirements for maintaining your license.
The good news is that there are plenty of opportunities to stay up to date on what's happening in the insurance industry. Online courses, seminars, and industry events can help you meet your continuing education requirements and stay informed.
When you establish an insurance agency, you need to make sure it's properly protected. You sell insurance for a living, but you also need to buy insurance to help protect your investment. Some types of commercial insurance you may need to purchase include general liability insurance, commercial property insurance, errors and omissions insurance (commonly referred to as E&O coverage, which protects you against errors that you or a member of your staff may make), and workers' compensation insurance.
Insurance and other financial services agents are governed by regulatory agencies such as state departments of insurance and the Financial Industry Regulatory Authority Inc. (FINRA). FINRA has particular jurisdiction over investment professionals and firms that sell variable life and variable universal life insurance.
As an insurance agent, it's your responsibility to maintain all your resident and non-resident state licenses and appointments with your insurance carriers. If you forget to renew any of your licenses on time, you may have to pay a fee to reinstate them.
Once you get your feet firmly on the ground as an insurance agent, you will need insurance leads to generate new business. Sure, you can contact family and friends and offer them insurance, but ultimately, you'll need a way to find new clients.
Assurance offers you personalized training and pre-qualified leads who are eager to talk to you about finding the right insurance coverage for them. Find out more about joining Assurance today.
Once you are ready to get started with your own insurance business, Nectar connects you with clients who have a verified interest in purchasing your insurance products through real-time leads.
This article reflects the features of Nectar as of the date of publication. Features are subject to change at any time. This article is meant for informational purposes only, it is not a guarantee that using Nectar will help you achieve specific business or financial results and is not intended to serve as the sole recommendation for any business financial decisions.
