Posted by Kara Franklin ● April 4, 2023
How to Become an Insurance Agent
An insurance agent is often thought of as a salesperson. While sales is a primary element of the job, there is so much more to being an insurance agent. Agents offer support and guidance to clients in times of need. If a fire destroys a client’s home or if they lose a loved one, their insurance agent may be one of the first people they call.
When enrolling an applicant for an insurance policy, agents help them prepare for such outcomes by finding the best possible policy that fits their needs and budget. Successful agents take time to build rapport with their clientele. They get to know each client’s needs, goals, and budget to match them with the right policy. Recommendations should always be made in the client’s best interest. That is the ethical standard all insurance professionals are expected to meet, but it’s also the best sales tactic. When a consumer trusts an agent’s intentions, they will continue doing business together.
So, at its core, a career in insurance is about helping people. You’ll also have a career with amazing opportunities. Insurance sales is a lucrative business. The industry itself is growing rapidly, and there is a lot of potential for upward mobility. With the right skills, you can begin a career with limitless earning potential, providing financial stability for you and your family. According to the 2021 Bureau of Labor Statistics, the median salary for an agent is $57,990–$70,570, and the top 10 percent earned more than $126,510. These statistics exclude the data for self-employed agents, sole proprietors, and partnerships.
Want to find out more about becoming an insurance agent? We have provided a step-by-step guide for what it takes to become an insurance agent. These steps can help you identify the ways you can work in insurance, the type of licenses available, the licensing process, and the basic requirements for this position.
Step 1: Decide How You Want to Work in Insurance
If you choose to pursue a career as an insurance sales agent, you may be either a captive or independent agent. There are pros and cons for either choice.
Captive agents represent one insurer. They may be employees or independent contractors. Their offers are limited to the policies provided by that company. Captive insurance companies support their agents with marketing. The company’s marketing strategy usually brings clients to the agent. The company also provides an office space, benefits, and a base salary plus commissions. As an employee, however, the insurer determines the agent’s work schedule. The salary and commission the agent can receive will also be lower than what an independent agent can earn.
Independent insurance agents may represent multiple insurance companies, so they can offer much more suitable policies to their clients. They are able to offer quotes from all the companies they represent, finding the best rates for their clients. Independent agents are considered self-employed and can create their own schedules. You may have another career while doing insurance sales on the side. You can become a small business owner by opening your own agency or brokerage. This also means you are responsible for office space and overhead expenses. Because independent agents are not supported by a large brand, they take marketing into their own hands. Independent agents receive higher commission, though their compensation is entirely dependent on commission.
Step 2: Decided What Insurance You Want to Sell
There are several different types of insurance you can sell. The kind of insurance you can sell depends on your licensure. The most common types of insurance licenses are life, health, property, and casualty. You may be licensed for one line of insurance or pursue a combination such as Life & Health or Property & Casualty.
Life insurance grants you authority to sell coverage on an individual’s life. This authority includes endowments and annuity contracts. Many people purchase life insurance to financially prepare their families for the financial strain that may accompany the death of the main income provider. Companies may also purchase a life insurance policy to give the company runway to find a replacement after the untimely death of a key employee.
Selling life insurance provides commission on the initial sale and additional commission at policy renewal. Because this commission is residual, the agent may continue to receive commission upon renewal even if they are no longer acting as an agent.
Variable Life and Variable Annuity Products
Variable life insurance and variable annuity products utilize investments and securities to increase a policy's cash value. Because these products involve securities, it requires you to receive additional licensing and to register with FINRA. A securities license allows you to offer additional financial services.
Accident and Health or Sickness Insurance
Accident and health insurance will compensate insureds for physical injuries, sicknesses, hospital expenses, and other health services. Other coverages include disability income, long-term care, and Medicare Supplements. Policies may be sold as individual or group plans.
Property insurance protects homes, buildings, and items of property, such as personal or business property, against unintentional damage caused by fire, weather, and vandalism and theft. Some property policies, such as homeowners or business owners insurance, include liability coverage. If someone is injured on the insured's property, their medical expenses are covered.
Casualty insurance protects the insured against liability claims for which they are at fault. This includes physical harm to another person or property. Automobile insurance, product liability, workers' compensation, aviation, and surety bonds are all lines that fall under casualty insurance.
Property & Casualty insurance are often pursued together. It is rare for an agent to be a property-only or casualty-only agent.
Personal lines insurance is written specifically to cover losses of personal property, such as a home or dwelling, personal belongings, and personal auto. This includes legal liability for damages arising from the ownership of a home, auto, or boat, and the actions of the insured and their family.
Commercial lines insurance is written to cover losses unique to businesses. Business insurance includes commercial property, commercial auto, businessowners coverage, commercial general liability, professional liability, and workers' compensation.
Agent vs. Broker
Agents represent the insurance company, and brokers represent the insured. Insurance brokers may contact multiple insurance carriers to find a suitable policy, but they do not have the authority to bind coverage. Only an insurer or an agent of the insurer may confirm that coverage is in place. Another difference is that the client pays an insurance broker's commission, where an agent's commission is paid by the insurance company. Not all states have broker licenses available.
Step 3: Ensure You Meet the Basic Requirements
To apply for a producer license in a state, an individual must be at least 18 years old. To qualify for a license, you must be familiar with insurance products, industry information, and federal and state insurance regulations. Licensing requirements may vary by state, but each state requires you to pass a licensing exam for the type of insurance you plan to sell. TO be prepared for the exam, it is important you take a prelicensing education course.
To begin acting as a producer, most states only require an applicant to receive a producer license, pass a background check, and be appointed by an insurer.
Step 4: Complete Your Prelicensing Education
Check with your state to see what your prelicensing education requirements are. Many states require applicants to prove they have completed a training course and a particular amount of study hours. For example, Michigan requires applicants to complete 20 hours of an approved study course per line of insurance before scheduling the state exam.
A prelicensing course helps you pass the state exam on the first attempt and avoid additional exam fees. It teaches you in-depth knowledge of insurance products and state regulations. Our online courses are accompanied by practice questions and exams, engaging activities, and video lessons. The course can also be supplemented with flash cards, physical study manuals, and webinars. We also provide study tips on our blog, such as how to successfully pass your exam on the first attempt.
Step 5: Pass the Licensing Exam
Passing the licensing exam is the next step to receive your license. Exams are offered online in most states or in-person at testing centers. You can expect the exam to last 2–3 hours and have around 100–150 questions. These amount vary depending on your state.
The state exams are designed to test your comprehension and will be difficult. We encourage candidates to study at least 20 hours per line of authority before taking the exam. If you do not pass an exam attempt, we have resources to help you.
Step 6: Start Your Career
Once you have received your license, you are nearly ready to start your career! Before you can sell policies from an insurance carrier, you must be appointed by it. This lets the state know you are acting on the carrier's behalf. Each insurer will have different products available to sell and will set their own commission rates. Receiving an appointment is similar to interviewing for a job. It is important to research the carrier before committing.
An insurance agency will hire you as long as you meet the basic requirements and have a high school diploma or GED. A bachelor's degree or other higher education may help in certain areas, but it isn't necessary. You can increase your earnings and receive promotions based on your personal performance, drive, and passion. You can also choose to become licensed in other lines of authority after starting your career.
If you are a captive agent, you will be appointed to represent one insurer. Independent agents can be appointed by multiple insurers.
Step 7: Plan for CE and Know When It Needs to Be Completed
Once you have your license, you will be required to complete continuing education courses to maintain it. Continuing education gives you the opportunity to learn updated product information as well as changes to state or federal law. Some insurance products, such as retirement accounts and long-term care insurance, require specific product training before you are authorized to sell those products. Each state has minimum requirements that must be met within your license renewal period. For example, agents in the state of Texas must complete 24 hours of continuing education every 2 years.
Ready to start your insurance career? A.D. Banker can meet your prelicensing and continuing education needs.