Becoming Independent

Before you begin the process of getting licensed, you’ll need to know which products you will be selling (see above) so that you choose the proper license for your insurance agent business. License names will vary depending on the state you live in.

The two most common license types are:

• Property and casualty license, for agents who plan to serve clients who need auto, home, and business insurance.
• Life, health, and accident license, for agents who plan to serve individuals who need insurance related to life events, such as life insurance, accidents, or health insurance.

Your plan may require you to obtain multiple licenses. You will need to get the specifics from your state licensing department or the company you plan to represent.

Why do insurance agents need a license?

Agents must be licensed to discuss insurance products or complete sales. Each state has unique licensing requirements. People who operate without a license could face penalties or legal action.

Most states require you to complete a pre-licensing class. Many of these can be taken online or through an in-person course. Requirements vary depending on the state, from a one-day class to 20-40 hours of online training.

After you have fulfilled any pre-exam requirements for your state, you’ll need to schedule your official insurance exam. An outside company usually proctors these exams. You will go to a testing site at the scheduled date and time to take the test online. You may need to show proof of your completed training class before taking the exam.

When you pass your state insurance license exam, you’ll submit all required licensing applications to your state licensing department. Some states will require a background check, which may involve fingerprints. Once you’re officially licensed, you’ll be able to legally discuss and sell insurance policies.

You must be appointed by an insurance company before you have the authority to sell its products. You will need to complete an application with each insurance company you plan to sell products for and be granted an appointment and binding authority, which is recorded on your state insurance license.

ASCK Market Access helps members get appointments with a variety of insurance companies.

Many agents begin by writing their own insurance and prospecting to friends and family. This is a great way to get a good feel for how the systems work and become comfortable quoting new coverage.

At this point, it’s a good idea to begin marketing your agency. Joining KAIA is the first step to find the resources you'll need to create a website and promote your business online or explore local advertising options. Many options are available, and most will require some trial and error until you find what works best for you.

As a new insurance agent, you’ll also want to make sure that your agency is protected with commercial insurance. There are several kinds of coverage to consider:

General liability insurance: General liability coverage will protect you in a wide variety of situations. One of the most common risks is claims of bodily injury if a client is injured while in your office. Something as simple as tripping over carpet could result in an injury and a liability claim. This coverage can be combined with commercial property insurance in a business owner’s policy, often at a discounted rate.

Errors and omissions: E&O coverage is required by almost all insurance companies before you will be allowed to write their policies. This protects your clients against errors that you or your staff may make. For example, you might accidentally delete the wrong car from a policy, and it isn’t covered in an accident. If it is an error that you are responsible for, your E&O coverage will take care of the client.

Workers’ compensation: Workers’ compensation coverage is designed to protect your agency from claims involving your employees. If an employee is injured while at work, it will pay a portion of their lost wages and medical bills. Even if you only have part-time workers, workers’ compensation is required for businesses in most states.