How to Become an Insurance Agent

So, you’ve decided to become a health and/or life insurance agent. Congratulations on taking the first step on this journey in your career!

There are quite a few things to consider and do beforehand, but don’t worry!

We’ll go over exactly what you need to learn about how to become a licensed insurance agent.

Do Your Research

It may seem obvious, but you have to do your research on becoming an insurance agent. Having the knowledge of where to start your insurance agent journey is taking the first step.

Basic Insurance Sales Agent Requirements

Some of the ground-level requirements to become a licensed insurance agent are:

• Be at least 18 years old
• Pass a criminal background check, often including fingerprinting
• Possess a high school diploma or GED, but a college degree can also be helpful
• Reside in a state where you are seeking licensure

State Requirements for Local Insurance Agents

Each state’s prerequisites differ a little bit from each other. Typically, however, the specific requirements to complete remain the same across the board.

If you plan on selling more than one type of insurance, you may complete pre-licensing education on each type. Licensing requirements differ from state to state, where some states don’t have any requirements at all. For those that do, the two most popular choices are health or life insurance.

After completing the education, you also have to pass a state licensing exam, which is state-administered and proctored. It’s designed to demonstrate your knowledge of insurance laws, regulations, and products.

Each state has its own distinct Department of Insurance (DOI). After completing the pre-licensing education, you must submit your application for licensing to your respective state’s DOI.

After securing your license, you also have to complete mandatory continuing education (CE) credits to maintain the license. These courses also vary from state to state, so be sure to check out your state’s course catalogue.

How Much Money It Costs to Get Started

Often an unspoken rule, starting up any business does cost a little bit of money. In the case of insurance agents, the cost ends up being:

• Pre-licensing education: $150-$330
• State exam fee: $40-$150 per attempt
• License application fees: $30-$200
• Background check/fingerprinting: $30-$50
• CE: $50 or more
• Medicare/AHIP Certification: $175
• NABIP Certification: $100
• FFM Certification: Free
• Errors and omissions (E&O) insurance: $300-$1,000/yr
• Marketing/leads: Can cost more than $1,000 (but can cost less if you partner with Ritter!)
• Technology/CRM: Around $600 annually (it can be free if you partner with Ritter)!
• Office equipment: Computers and printers can be anywhere between $2,500-$5,000
• LLC (optional, but highly recommended): $35-$500

Overall, it will cost somewhere between $3,410 to $9,205 to establish your business. It’s important to keep that in mind so that you can plan out when and how you want to get started.

How Much You Can Earn as an Insurance Agent

Insurance agents are typically paid through commissions, a percentage of the insurance premium on a federally regulated standard. Some products, however, may pay a flat fee.

If your clients continue to renew their policies, you’ll receive an annual payment, usually about half of your initial commission when you first write the business. Also, if they cancel their policy, you’ll have to pay back a portion of that commission.

According to Indeed, the average salary of an insurance agent is $74,989 a year, with the range being from $35,377 on the low end and $158,956 on the high end.

Consider Being a Captive vs. Independent Insurance Agent

Knowing the steps to take and all the costs associated with starting a business, you also should figure out what kind of insurance agent business you want to run. Different kinds of insurance equal different kinds of insurance businesses!

To create the backbone of your business, you’ll want to choose whichever business model you’re interested in. There are two rather popular options:

• Captive
• Independent

Both have their own pros and cons to consider!

Captive Insurance Agent

A captive insurance agent has an exclusive partnership with one company. You’ll be contractually obligated to sell products for only one insurance carrier. While you’ll have access to:

• Strong, established brand recognition
• Consistent training
• More support from that specific company

You’ll also be limited to comparison-shop for clients, have stricter sales quotes, and be unable to offer policies from other carriers if their product isn’t the best fit.

Independent Insurance Agent

An independent insurance agent represents multiple insurance companies rather than just one. This allows you to compare coverage options, prices, and policies from various carriers to best fit your clients. We find that this is the more flexible and profitable option for most insurance agents. Independent agents can:

• Work with multiple carriers
• Prioritize client needs
• Offer personalized services
• Handle various types of insurance and assist with claims
• Use localized knowledge

However, be aware that, while independent insurance agents have more flexibility, they also have responsibility for their own leads, marketing and training. That’s where an FMO like Ritter would come in handy to lend a helping hand!

Find Your Niche

Determining what you want to focus on first is also crucial when starting your business up. You’ll want to figure out what products from what carriers you want to sell.

Master selling those products before you branch out to others. Eventually, you may even be able to start cross-selling!

Draft Your Insurance Sales Business Plan

For a successful insurance agent business, you’ll want a results-oriented, actionable business plan that focuses on the following:

• Defined, weekly activity (calls/appointments)
• Ways to track Key Performance Indicators (KPIs)
• Build relationships for referrals

In tandem with figuring out your niche, you’ll need to identify the ideal clients who fit within the market you’ve selected. Tailoring your marketing messages toward specific target audiences can help you stand out against any competitors.

If you’re looking for a specific way to figure out how to accomplish this through reasonable goals, you can use SMART goals.

SMART goals are:

• Specific –⁠ Set specific goals focusing on what you want to accomplish (what, why, who, where, which questions).
• Measurable –⁠ Think in terms of “how many” and “how much” to quantify your progress.
• Achievable –⁠ Consider realistic goals and if you have the necessary resources and ability to complete.
• Relevant –⁠ Making a goal that is worthwhile to you or related to a personal/professional growth.
• Timely –⁠ Ensure the goal can be completed within a specific timeframe and if it can’t, maybe plan on it for the future.

Once you draft an outline of a business plan, you can also consider things such as any potential roadblocks you may encounter and how you can handle them.

Times change and using the same business plan repeatedly may cause your business to become stale.

And don’t forget to draft a business plan annually! Times change and using the same business plan repeatedly may cause your business to become stale.

To break progress down into better chunks, you can review your business statistics monthly or quarterly depending on what works better for you.

Get Your License(s) to Sell Health and Life Insurance

Now that you’ve done your research, the first actual step to that insurance agent title is obtaining your license to sell insurance.

Licensing is extremely important as insurance agents are responsible for understanding laws, policy provisions, and ethical practices. It also protects clients by holding agents accountable to both state and federal regulations.

Becoming a licensed insurance agent can be very simple and easy. Make sure you know which different types of insurance licenses you want to procure so you can get everything done at once!

Pre-Licensing Education

Pre-licensing courses may be required prior to taking your state’s licensing exam.

The courses cover topics like insurance regulations, ethics, and products. Because courses can differ from state to state, you can use the WebCE website to find a list of approved courses per state.

To search for these courses:

• Click on Courses Catalog
• Select Pre-Licensing Prep
• Choose your respective state
• Pick the specific licenses you want

Note that some courses can be completed online, while others must be completed in person.

Take and Pass the State Licensing Exam

Just like the pre-licensing courses, state insurance licensing exams vary from state to state. However, they are completed for the same reasons. To fully prepare for the exam, you could even take a pre-licensing exam prep course.

The exams are typically 50 to 200 multiple choice questions with a passing score being 70 percent or higher. If you’re going for both life and health insurance licenses, it’s recommended to do both at the same time.

When you go to take one of these exams, you’ll have to bring your certificate from the pre-licensing education, if required, and a valid form of ID. These exams are usually proctored by a third-party vendor like PSI, Pearson VUE, or Prometric.

Apply for Your Insurance Agent License

After passing your exam, you will then submit an application to the DOI, usually through the National Insurance Producer Registry (NIPR) or Sircon.

If you haven’t completed the background check or fingerprinting, this is the time you’ll need to ensure that it’s finished. You’ll also need to pay the corresponding application fees upon submitting.

For a more in-depth look at getting licensed, check out our Knight School video series on the subject!

Get Your Certifications

If you plan to sell Medicare or ACA products, these certifications are vital. Depending on the carrier, the certifications may be different.

Some examples of training are:

• Medicare and Fraud, Waste, and Abuse (FWA) training (this training needs done every year)
• Product training for each Medicare Advantage (MA) and prescription drug plan (PDP) carrier you want in your portfolio
• AHIP certification or NABIP MA certification
• ACA Exchange & FFM Certification

At Ritter, we have our very own Certification Center, where you can easily locate each Medicare carriers’ certification availability dates, requirements, and links all in one place. For more information on a specific carrier, just click on their name (RitterIM.com login is required to view full certification details)!

For more information on AHIP or NABIP Medicare certification, check out our FAQs on both posts or get more information on ACA exchange or FFM certification!

Maintain License with Continuing Education

To keep up with your license, you’ll have to complete continuing education (CE) requirements approximately every two years for most states.

Just like licensing, the CE requirements differ between the states, as well as the amount of time that passes before completing more.

Get Contracted and Appointed by Insurance Carriers

While obtaining your license allows you to sell, you can’t just start grabbing different carriers’ products and throwing them at clients!

To legally act on behalf of an insurance company and promote their products, you must be contracted and appointed first.

The easiest way to get contracted and appointed is by partnering with a field marketing organization (FMO), like Ritter Insurance Marketing! FMOs assist contracting by providing diverse portfolios of insurance carrier contracts for their agents.

Depending on the size of the FMO, the number of contracts may differ. Most will offer a mix of bigger, national carriers as well as small-name, regional carriers. For example, Ritter offers around 275 unique products and contracts with more than 100 insurance carriers in the health and life markets.

The easiest way to get contracted and appointed is by partnering with a field marketing organization (FMO), like Ritter Insurance Marketing!

Find a Mentor

No one said you had to conduct your insurance agent business alone! Having a mentor to guide you through the different challenges you may face can help you in the long run. Typically, the best types of mentors are top-producing agents who are between three to 10 years ahead of you. They’ve most likely been through just about everything you may also experience!

We can recommend a few ways to find a mentor, so explore each option to see which one works best for you!

Professional Associations or Groups

Some of the best associations and groups to look at are:

• NABIP –⁠ Offers a formal mentor program
• Big “I” (Independent Insurance Agents & Brokers of America) –⁠ Provides networking opportunities and Young Agent Council (YAC) mentorship programs
• Local Chambers of Commerce –⁠ Help connect you with business owners for networking
• NAIFA –⁠ Much like NABIP, but offers more networking opportunities

Use LinkedIn and Social Media

Social media is a powerful tool that all forward-thinking agents should consider using to enhance their budding business. Specifically, on LinkedIn, you can identify and follow the most popular, active agents or even connect with them!

You can also engage in social groups across different social media platforms like Facebook as well as forums like the Insurance Forums website!

For a more detailed look at using social media as a form of marketing, crack open our eBook, Social Media Marketing for Insurance Agents!

Ritter Sales Team

We aim to provide our agents with the best resources possible, so we also offer support through our Sales team! Depending on which state you reside in, you’ll have a dedicated specialist that you can schedule appointments with!

Our Sales team is tailored to offer you guidance on the top products in the specific areas you plan on marketing in.

Our Sales team is tailored to offer you guidance on the top products in the specific areas you plan on marketing in. Fill out our form at the bottom of the Sales team page to get started!

Officially Establish Your Business

You’re almost done turning yourself into an insurance agent extraordinaire! Now that you’ve got the most difficult steps out of the way, you’ll want to launch your business in the public eye.

Keep in mind that all this will take time: approximately up to six months from inception. If you feel like this process takes too long, don’t worry about it! It’s quite normal for businesses to take a while to get up and running.

Form a Business Entity

Choosing an entity will decide your business’ liability protection, taxation, and administrative complexity.

You’ll want to ensure you’re selecting the right entity to meet your business needs. Use this table to decide which works best for you:

Apply for a Federal Employer Identification Number

Not all new businesses are required by the IRS to have a Federal Employer Identification Number (FEIN), but most are.

FEINs are unique, nine-digit numbers assigned by the IRS for tax identification. It’s also referred to as a federal tax ID, functioning much like a Social Security Number (SSN), but for a business entity.

The only exception to not receiving a FEIN is choosing a sole proprietorship with no employees.

It’s still highly recommended to get one for separating personal and business finances as well as banking. You should definitely get one if you plan on:

• Opening business bank accounts
• Not wanting to use your SSN to protect your personal information
• Founding your business as a separate entity for vendors, credit cards, and establishing business credit.

It’s easy to apply for one online on the IRS website!

Get E&O Insurance

Upon officially establishing your business, you’ll need to get E&O insurance. You might find it funny: “insurance for an insurance agent?” Yes!

This type of insurance protects agents like you from any errors or negligence that may happen while assisting clients.

As soon as your business entity has been established, investigate the different E&O insurance policies out there to see which one fits the needs of your business!

Note: Some carriers may require you to submit a copy of your E&O insurance as part of the contracting process. Be sure to check with each carrier as needed.

Launch Your Brand and Marketing

Any new business wants to get their name out there, so you should be no exception! Something as simple as creating a business name and logo can go a long way for you to become more recognizable.

Something as simple as creating a business name and logo can go a long way for you to become more recognizable.

After figuring out the basics, you’ll want to apply your business name and logo to a diverse number of places. Some places include a personalized website and different social media accounts that correspond to where your target market occupies.

At first, you can start with what’s called your “warm market,” such as family, friends, and professional connections to get your initial quotes.

You can also invest in buying leads or using search engine optimization (SEO) and local marketing to find new clients.

Partner with an FMO

Last but certainly not least, partnering up with an FMO is the best way to have that back-office support you need. FMOs can help you out by:

• Giving you extensive Medicare support services at no additional cost
• Exposing you to opportunities for generating Medicare leads
• Access to exclusive technology
• Providing you the latest up to date insurance news

Interested to know more about FMOs? Check out our eBook How Insurance FMOs Work to learn about the basics as well as what to look for when choosing one!

We know there’s a lot that goes into becoming an insurance agent. From licenses to marketing your business, there’s quite a few things to consider and make decisions on. But you don’t have to go through this alone!

We’re here to help you navigate through this journey together. Register with Ritter today for free to gain that helping hand you need to make your business the best it can possibly be!