Establishing Insurance Company

If you always wanted to be the master of your own destiny and have a business of your own, then you will do well to decide on the insurance sector. It is to a large extent recession-proof and an essential part of modern life.

A lot of insurance business is generated simply because customers not only wish to protect their assets from risk but also they need to comply with applicable rules and regulations.

For example, it is not possible to have a car without insurance and typically all home mortgages require your home to be insured. Also, given the uncertainties of life, more and more people are purchasing life and health insurance.

Do You Have It in You?

The insurance sector has its own requirements so you need to assess your personality to see if there is a proper fit. Apart from salesmanship of a very high degree, perseverance, a genuine understanding of insurance products and how they can address the concerns of the customer are attributes that are essential to a successful venture.

Undoubtedly you need to be a good business manager but you really need to be an excellent salesman to make this business work.

Not only do you need to be able to convince strangers that they are better off trusting you and your advice but also recover fast from rejections and plug away day after day knowing that you are in a commission-based business where you don’t eat if you don’t sell.

Individual Licensing

While there are no educational bars on your making a business out of selling insurance, you do need have a license issued by the state that allows you to sell insurance in that state.

For this, you need to attend 20-40 hours of instruction on insurance matters and 12 hours on ethics and pass an examination. The course can even be taken online; the typical fees are $300-$500. Courses are state-specific so if you are planning to operate in multiple states, you need multiple licenses.

While separate licenses are required for different kinds of insurance such as vehicle insurance, home insurance, health insurance, life insurance, etc.

The tests are multi-part so it is quite possible for you to pass individual sections that will allow you to sell the relevant type of insurance. You will generally be allowed to retake the section in which you have failed without a fresh application fee at least once.

The acquisition of a Series 6 license from FINRA will allow you to sell variable life insurance and annuities.

Agency Licensing

If you intend to sell by yourself, the individual license is sufficient; however, if you are planning on recruiting other agents to work for you then you will need an agency license. However, if you are only hiring telemarketers and support staff, you do not need an agency license.

An agency license is also required if you are planning to establish a company instead of a sole proprietorship. No additional testing is required to be undertaken, however, application and license fees that vary from state to state will need to be paid.

Start-Up Costs

The amount of money you require to start off your insurance business depends on the scale you are planning. Starting with a home office is perhaps the best before going on to bigger things because you don’t need to pay rentals, or spend on signage, furniture, and other office expenditure.

Depending on the location, commercial space rentals can vary a lot in the same city and even across cities.

Essential Insurance Cover

To be able to sell insurance, you also need to be covered with a few essential policies. A Business Owner Policy (BOP) can be taken out to protect all assets of your business, including the car and office equipment.

Errors and Omissions (E&O) cover that is often referred to as professional liability insurance will cover you from the effects of making mistakes or forgetting to do something that can get you sued by customers.

You will also need a surety bond that will cover your insurance company from you misappropriating the insurance premium collected from a customer.

If you hire staff then you will need to carry worker’s compensation insurance, the details of which vary from state to state.