Top 5 Things To Know Before Establishing Insurance Company

Establishing Insurance Company

If you have always wanted to be the master of your destiny and have your own business, 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, having a car without insurance is impossible; typically, all home mortgages require your home to be insured. Also, given the uncertainties of life, more and more people are purchasing life insurance and health insurance.

Do You Have It in You?

The insurance sector has 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 customer’s concerns are essential to a successful venture.

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Undoubtedly it would be best if you were a good business manager, but you need to be an excellent salesman to make this business work.

Not only do you need to convince strangers that they are better off trusting you and your advice, but you 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 doing business out of selling insurance, you do need to have a license issued by the state that allows you to sell insurance in that state.

For this, you must 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. Methods are state-specific, so if you plan to operate in multiple states, you need multiple licenses.

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

The tests are multi-part, so you can pass individual sections that will allow you to sell the relevant type of insurance. You will generally be allowed to retake the area where you have failed without a new application fee at least once.

Acquiring 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 plan on recruiting other agents to work for you, you will need an agency license. However, you do not need an agency license if you are only hiring telemarketers and support staff.

An agency license is also required if you plan to establish a company instead of a sole proprietorship. No additional testing is needed 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 your insurance business depends on the scale you are planning. Beginning 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 significantly in the same city and even across cities.

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Essential Insurance Cover

You must also be covered with a few essential policies to sell insurance. 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, which 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 covering your insurance company from misappropriating the insurance premium collected from a customer.

If you hire staff, you will need to carry worker’s compensation insurance, which varies from state to state.

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