Starting an Independent Insurance Agency: Step-By-Step Guide

How to start a independent insurance agency

The current covid-19 pandemic has brought to light the importance of financial protection in crises and, with it, the growing demand for life insurance. If you are an experienced agent, now is a great time to start your own agency. But while doing so has its rewards, it’s also a considerable challenge, especially if you have no prior trading experience. So, to get you started on the right foot, here’s a guide on how to start an insurance agency from home.

step by step guide: how to start your own insurance agency

Learning how to start an insurance business is not that different from starting other types of businesses, and the steps are just as important. Be sure to complete each step thoroughly and accurately to set yourself up for success.

1. build a business plan

Creating a solid business plan is always the first step in starting your own insurance agency or any business. That’s because this document is the blueprint that will guide all the decisions you’ll make at your agency. Starting an insurance company requires you to set goals, take stock of your available resources, and prepare for risks and obstacles along the way. Creating a business plan helps you with this process. In addition, it also allows you to communicate your business plans to potential partners, employees and the bank to secure financing.

2. determine its legal structure

One of the first decisions you’ll make when starting an insurance company from scratch is choosing your legal structure. this is crucial because your agency setup determines the responsibility you take on as an owner, among other things. For example, establishing a corporation or LLC protects your personal assets if the company is unable to pay its debts because the company is considered a separate entity. In a sole proprietorship, the owner assumes all the responsibilities of the business.

Of course, this is just a simplistic overview of legal structures. there are many other factors at play, such as tax implications and requirements. We recommend speaking with an attorney or legal advisor to help you decide what is best for you.

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3. get funding

One of the main reasons most businesses fail is lack of sufficient capital. therefore, it is crucial that you ensure you have sufficient funds when starting an independent insurance agency. this is true even if insurance agencies rely primarily on staffing, as they still have to pay operating expenses or fill “gaps” in billing cycles.

There are countless ways to raise capital, depending on your risk profile. Of course, close family and friends are always your first step. Beyond that, you can get a loan from a third-party lender or bank or buy a blanket. You may also consider hiring partners if you don’t mind sharing the profits in exchange for less debt.

4. register your agency name

The next steps on how to start an insurance company involve informing the government and the general public of your intention. and it starts with registering your agency name. Registering your agency name allows you to reserve it for your exclusive use, so that no other company can claim it. the other reason to do this first is that it will tell you if your proposed agency name is already in use, so you can change it from the start.

At a minimum, you must register your business name with the state government. but for the best protection, consider applying for a trademark for your name. If you are a sole proprietor, you can apply for a business name or DBA (“doing business as”) name instead of your personal name. You can be creative in how you name your agency, but keep in mind that this is how your clients will know and remember you. therefore, it is beneficial to make it simple to remember and easy to pronounce and spell.

5. tax identification number

Starting an independent insurance agency means paying taxes to the government. To do that, you must register your business for a Federal Employer Identification Number (FEIN). this is similar to how you use your social security number when filing taxes, but for businesses. You apply for your business tax identification number with the IRS. the only requirements you will need are the owner’s business name, address, and ssn/lyh.

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6. register in your state

once you have your tax identification number, the last step to make your agency official is to register with your state insurance commissioner’s office. Aside from tax ID, the only other requirement is to sign a checklist that lists the state’s insurance regulations. you will also need to pay a small fee.

7. licenses and permits

Even if you’ve already registered your business, you may need to obtain some permits and licenses to operate legally. what these are can vary from state to state and even depends on the location of your business. therefore, it is best to consult with local agencies or a business expert for further guidance on your specific requirements.

8. buy insurance

As an insurance agency, it would make sense to insure your own business. At a minimum, you’ll need general liability insurance and errors and omissions (E&O) insurance. both will cover business risks such as property damage and legal costs stemming from negligence and error claims. beyond this, it will depend on what your business uses on a daily basis. If you are using a company vehicle, for example, you need to have auto insurance. also, renting or owning a physical office must be accompanied by commercial property insurance.

9. create your website

Many aspects of selling insurance happen online, whether it’s searching for potential customers or providing a place where customers can go for more information. As an independent insurance agency starting out, you need to have an online presence, starting with a website. Creating a website can be expensive and time consuming as you will need to hire someone to design your agency website. a better solution is to use services made for you like ilife. With the iLife platform, you can have a custom white-label website with no coding experience required. prospects can learn more about your offerings through the website and are even pre-screened with questions. this frees up your agent’s time and effort to close more deals.

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10. develop a marketing plan

As we mentioned earlier, selling insurance no longer relies on cold calling or door-to-door tactics. while they can still drive results, using the power of social media and content marketing is a much more effective strategy in today’s connected world. therefore, having a loveyou digital marketing plan is a crucial ingredient for the success of any insurance agency. Like the business plan, the marketing plan helps you focus on the strategy that you think will work best for your needs.

11. build your customer base

You’re not really in business unless you get your first customer. And that is why an essential part of starting an insurance agency business is the lead generation strategy. Right now, there’s no shortage of places to find new customers. the key, therefore, is to attract and retain them. you can do it by giving value in the first encounter. try to be helpful and avoid appearing advantageous. Do everything you can to make your customers feel like you really care about them, not just because you want the sale. Having this mindset is the best way to gain their trust.

build trust with ilife

ilife is the world’s first platform designed specifically for life insurance agents, providing the fastest and easiest way for life insurance companies to build an interactive customer experience online. With ilife, starting an independent insurance agency is easy. you can create a fantastic website, manage customer relationships, and provide real-time quotes, all with just a few clicks. Sign up for free and see how easy it is to build and nurture relationships online.

If you enjoyed this article, you may find our resource “The Guide to Using Technology to Recruit New Life Insurance Recruits” helpful.

Enjoy this content and want to dig a little deeper into the topic of selling life insurance? the ilife blog is just what you need. click here to explore today!


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