How to Become an Insurance Agent

Contents

How to become an insurance agent is about the logistical steps you need to take to start your career in selling insurance. It is a step-by-step guide to the tests, licenses, certifications, and forms required.

After you read this dry, but very helpful article, please read this one next: Selling Insurance – How to Get Started. This article is more of the heart and soul of how to start actually selling insurance. It will help you to create a strong foundation for your sales career. Then, please peruse our blog for more helpful articles to bring your career to the next level.

Decide What You Want to Sell

When you are first starting off in insurance, you will want to concentrate on selling in a specific area. Selling all types of insurance to all types of people and/or businesses is not feasible. There are just too many different parts to each kind of insurance. Moreover, there are way too many licenses to hold, carriers to contract with, and certifications to complete for all the different products.

After you get the hang of one product, you can certainly branch out. However, staying focused on one niche is the best way to maximize your limited time and resources.

An Example – My story of becoming a licensed insurance agent

My introduction to insurance sales was when I was working for a software company that serviced independent insurance agencies. From there, my first experience in being an agent was selling life insurance and financial products with an primary contract with one carrier.

I suppose I was technically and independent agent. However, I was trained by, and suppose to lead with one company first. As for the financial side, I was a FINRA licensed financial representative. I had taken the FINRA Securities License (Series 7), Financial Advising License (66). While in this position, I was courted by a Berkshire Hathaway Business Insurance company. I decided to switch to selling workers compensation as a licensed, yet inside agent, to small businesses on the east coast. I had to have a P&C license for this job.

After working at the Berkshire firm for two years, I moved back into personal insurance sales, but this time with a focus on Medicare products. That is where I have been ever since, and I love it. Every insurance industry niche I have sold in has been fun and fascinating in its own way. However, I love Medicare the most. Everyone has to find their own passion, and sometimes it takes a bit of experimenting. So, don’t be afraid to try something! And, if it doesn’t work out, that is fine. Try something else.

As a result, of hoping around to various insurance lines, I have taken both the Property and Casualty (P&C) licensing exam and the Life and Health (L&H) exams. Moreover, I have sold: life, health, dental, Medicare supplement, Medicare Advantage, critical illness, and on the other side, workers compensation. I have not sold car, home or personal property insurance. I have no desire to do so.

Insurance Lines You can Sell

Here are the main lines of insurance agents sell.

  • Property & Casualty: Automotive, Homeowner, Renters, Umbrella, Motorcycle, Boat, Trailer, etc.
  • Life Insurance: Term, Whole (Traditional, IUL, Final expense, Children’s Whole Life, etc.), Disability
  • Annuities
  • Health: Medicare Supplements, Medicare Advantage, Critical Illness, Health, Dental, Eye, etc.
  • Business Insurance: P&C, Workers Compensation, L&H Keyperson, Group L&H Policies

There are others, but that list is a good place to start.

Being Captive or an Independent Insurance Agent

Once you have an idea of what you want to sell, you will need to decide between being captive or independent.

What is a Captive Insurance Agent?

A captive agent works for one insurance company and exclusively sells their products. That company trains the agent on their suite of insurance products. The insurance company (or carrier) often pays a captive agent a base salary. Plus, they typically get commissions on top of their base pay. These commissions can be reoccurring or paid in one time bonuses, depending on the contract.

I was a captive agent when I worked in workers comp. I have a starting base pay. Plus, I had bonuses for each sale I made. They were not reoccurring, but they were significant enough to more than double my base pay each month.

Benefits of Being a Captive Agent

The benefits to being a captive agent often include:

  • Access to benefits (such as paid time off, health insurance and 401k retirement plans)
  • Base salaries to subsidize commission pay
  • Dedicated support systems (for training, compliance and management).
  • Bonuses in the form of cash, prizes or trips for sales contests
  • In addition, captive agents are often W-2’d employees. This means that the carrier they work for will pay their employer shared and withheld taxes directly to the government.

What is an Independent Insurance Agent?

An independent insurance agent is an entrepreneur who works for themselves and can represent many different insurance companies. However, even though they are independent, they are often affiliated with an “upline”, an agency, and/or an Insurance Marketing Organization (IMO).

These agencies, uplines and IMOs will likely offer independent agents support and training. In exchange, they will get an “override” on what their contracted agents sell. This means, they also get paid by insurance carriers when their agents make sales. Also, they may help with compliance, and they will typically hold contracts with carriers for the agents. However, they usually do not offer salaries, paid expenses or benefits, such as health insurance or retirement savings.

Insurance companies pay independent insurance agents directly. As an independent agent, you would get commission statements and payments each month. Then, at the end of the year, you would get a 1099 tax form from each insurance carrier that you sold for that year. You are then responsible for paying self-employment taxes to the government quarterly.

Benefits of Being an Independent Agent

The benefits to being an independent agent include:

  • Being your own boss
  • Having the freedom to work as much as you want
  • Higher commission levels (than captive agents) to work towards
  • Freedom to work with multiple insurance carriers to offer the best selection of products to clients
  • Being a consulting expert on many products, rather than a salesperson pushing one product
  • Bonuses from multiple carrier contests including: incentive trips, cash and other prizes

In summary, being an independent agent usually means more money and freedom, but at the expense of base pay and benefits.

How to Become a Licensed Insurance Agent

Once you decide what kind of agent you want to be, and what lines of insurance you want to sell, you will need to become licensed in each state you want to sell insurance in.

Each state has different fees, forms and requirements for selling insurance. However, you will only have to test in your primary state. You will pay for a primary state license for each line or insurance you sell. Then, if you want to sell in other states, you will get an out-of-state license called a non-resident license. You have to do this in each individual state you want to sell in. Typically, these non-resident licenses have annual fees of around $50 (with some higher, and some lower).

State Insurance Licensing Information

So, where to start? If you are looking for information on getting an insurance license in your home state, and/or in a non-resident additional state, start with the National Insurance Producer Registry. (NIPR is an online tool for licensing. States use it to make their license process streamlined and accessible online. They do charge a fee for using the service, but it is worth it to do it all online, and in most cases, you might not have a choice. At this time, there are still mail in options available if you would rather write a check.)

To find first-time licensing information and requirements for your state:

  • First, go to the State Licensing Page here: https://nipr.com/licensing-center/state-requirements
  • Choose the drop down for “First Time License / New License / Line of Authority”
  • Then, pick your state from the next drop down, and pick “I am a Resident”
  • Choose the “Producer / Other” from the “Are you an Insurance Producer or Insurance Adjuster?” drop down.
  • Finally, pick “Individual” for “Identify Licensee.”

On the next page, you will see (Under the large box that holds the “Apply Now” button) expandable information for Fees, Lines of Authority, and Rules and Requirements.

An Example State for Licensing Requirements

Using my state of Nebraska as an example, under the “Lines of Authority” expandable “+”, I can see that a standard, first-time producer license is $50. I can also see which producer licenses require exams (and which ones just require you to pay the fee.) For Nebraska:

NE Licenses that Require ExamsNE No Exam Licenses
Life and Annuities
Sickness, Accident & Health
Variable Contracts
Property
Casualty
Personal Lines
Crop
Title
Funeral Insurance
Funeral Insurance – Director
Credit
Travel
Prepaid Legal
Surety
NIPR has a disclaimer that says, “NIPR verifies exams prior to allowing submission of an application.
Please note that license class names can vary by state.”

Who Can Apply for a License?

If you are over 18, can pass a state background check, can pay the license fee, and can pass a licensing test, that means you can usually apply for an insurance producer license (aka agent license).

State Testing Information

Note, before you can apply for a license, you must first pass a licensing exam! Who doesn’t love a test? Ok, not many people, but you have to take one (or more). Moreover, they are not that bad, but you do have to study to pass them.

Applicant must pass a written examination to determine competence to act as a licensed Producer in the lines of insurance (LOAs) for which such applicant is applying for.

https://nipr.com

Finding Your States Testing Information

The NIPR state information page will have a button link at the bottom of the page to your states producer licensing website. (You can also search for it on Google or your favorite search engine.) Each state uses different proctors for taking an exam. So, you will need to see exactly how to sign-up for a test in your state on their website.

For example, in my state, there is one “proctor” of the state licensing exam. The state website provides a link to go to that proctor’s website. There you can sign-up for an exam time, see an outline of what is on the exam, see a practice exam, and find information on test fees, scheduling policies, scoring information and FAQs.

Insurance License Exam Prep

There are study resources for insurance license exams, and I highly recommend you use one. Many of them have reading guides, videos, audio readings and practice quizzes and tests to help you pass. I personally learn best by taking the practice quizzes and test questions over and over. Good exam prep companies will create their questions to be very similar to the real questions. They base their study questions on previous test questions from actual tests.

Online vs. In Person Test Prep

Most test prep is online these days. (Especially, in when I am writing this now in Covid times). I prefer the test prep in online version as you can take it at your own pace (i.e. super-fast!) and complete practice questions as much as you like.

However, I have done an in person test-prep course at one point as well, and I liked it too. If you have a good teacher, you may also learn valuable industry insights as well as test relevant information.

Here is the exam prep company I used. (I have no affiliation with them.) I liked them because of the quality and quantity of their practice test questions.

How to Stay Licensed?

Insurance licenses are usually for two years. Then, you will have to pay a renewal fee.

Typically, each state will have requirements for staying licensed and in compliance. You can find these on your individual state information page. (Just choose “Renewal” instead of “First Time License” on the state info page drop down.) Usually, you will need to pay your license renewal fee. (In NE it is $50, and this is similar in a lot of states.)

In addition to paying a fee, you will also have to complete and report competing Continuing Education (CE) credits. Each state has a certain amount of hours of continuing education they want you to complete every two years. You will have to find a third-party CE provider. You will pay them for classes. Then, take the class, and finally, report your results to the licensing board of your state.

Make sure you know when your license renewal is up, and start the process as early as the state allows to make sure you are compliant and on time.

How to Become a Life Insurance Agent

Step One: Study for and take your test.

See above discussion on finding test and study information, and see step two for more life and health insurance test information.

Step Two: Apply for your state license(s).

If you want to be a life insurance agent, you will need to pass the Life Insurance Exam in your home state and then apply for a Life Insurance License. Typically, Life and Health go hand-in-hand. You will most likely have the option to take a test that is either JUST LIFE or JUST HEALTH, or you can take a combined LIFE AND HEALTH test.

I recommend you do the combined life and health test and then apply for your life and health producers license. There are many times when being able to represent both lines is important to your clients. Moreover, these lines piggy-back off each other often.

Step Three: Find an IMO or an agency to work with.

You can do this step out of order (i.e. you can do it first, if you like). You should know what you are going to sell, and you need to find a place to help you with contracting with insurance carriers. Solo agents can’t do this directly. You need to find an IMO – Insurance Marketing Organization – or an agency to work with.

If you have no connections and no idea of how to find an IMO, you can email me directly. I can point you in a few different directions. At this point, I am not an agency that contracts agents, but I have connections with some good ones all over the United States. I also can give you some IMO recommendations.

I understand being a “solo-preneur!” When I first ventured into Medicare Insurance, I did it all alone. I knew of an IMO I wanted to work with. So, I contacted them and they helped me get contracts with the carriers I wanted to work with in my state. It was going okay.

Then, one day my IMO rep called me and said they had an agency that worked with them too that wanted to grow. They wanted to bring in more independent agents (at the same commission level that I was already getting being all by myself). It was a great fit for me! I got support and leads, and that agency became my “upline.” (This means they got an override on my business, just like the IMO got an override from what I sell. This override is paid by the insurance carriers to the agency and the IMO, but not from my commission. So, it was a win-win for everyone.)

It’s going great now, and working with this agency helped me to expand in to Medicare Advantage products (from just selling supplements before).

Step Four: Trainings and Certifications on Products

Next step in becoming a life insurance agent is learning the products and solutions you will be selling. Carriers will have product trainings (both live and online) for you to take advantage of. You will also have resources available to you from your marketing organization. Some products may require you to certify to sell them. (Long-Term Care Insurance.)

The good news is, there are no other certifications you need to start selling basic life insurance or disability products. However, if you want to sell life insurance products tied to the stock market (like variable whole life), then you will need to be FINRA certified as well. (And that’s a whole other article.)

How to Become a Medicare Insurance Agent / Health Insurance Agent

Step One & Two: Study for and take your test.

Selling Medicare Insurance and Health Insurance (general, critical, dental, etc.) requires a health insurance license. Often, you can get just a health insurance license. However, just like with life insurance, I suggest you test and license for both Life and Health together. Again, it just makes sense with the synergy of the two product lines.

Step Three: Find Your IMO or Support Team

Please see the above section in step three of becoming a life insurance agent. You need support and someone to help you with compliance and contracting.

Step Four: Compliance, Certifications and Product Trainings

With all health and Medicare Products, you will need a lot of training.

  • For health insurance, you will need to understand the open market place in your area, group options, and other lines such as dental, eye, critical illness, etc.
  • For Medicare, you will need to know how Original Medicare works in general, and then you will need product information on Medicare Supplement, Medicare Drug Plans and Medicare Advantage Plans.

Medicare Advantage Training

In addition, there is one area of Medicare that you will need to be officially certified and licensed to sell: Medicare Advantage and/or Part D Drug Plans. If you choose to just sell Supplement (aka Medigap) Plans, then you do not have to complete extra training. However, if you want to sell MA, MAPD or PD plans, then you will need to complete the AHIP training and pass their test. In addition, each carrier that has MA and PD products also has training and tests you will need to complete and pass. Moreover, all these trainings and test have to be redone (and paid for) each year.

If you are selling products from multiple carriers, this will take up a lot of time each year. I do this, and it is not fun or easy really. If you are not getting a lot of business from these lines, you may decide that it is not worth it to sell MA, and you could just stick to supplements.

For all the Medicare, Supplement, Drug and MAPD Education you need, take a stroll through MedicareLifeHealth.com.

Protecting Yourself and Your Business: E&O Insurance

You are now in insurance, so you should recognize the benefit of insuring your assets. As an insurance agent, you will need to protect yourself from your own Errors & Omissions (E&O). E&O Insurance offers you protection as an agent from lawsuits from your clients.

If someone thinks you made an error in putting together their insurance protection, then they can sue you for damages. You will need a policy in place that not only protects you from suits, but fulfills the requirements insurance carriers have for you to be contracted with them to sell their products. Often, your IMO can find you a deal on E&O insurance.

Conclusions and Next Steps on How to Become an Insurance Agent

After you are trained, licensed, contracted, protected, certified and supported, you are ready to sell!

As I suggested at the beginning of this article, your next step should be to jump over to our article on How to Sell Insurance. This is a guide will help you in laying out the foundation of your business and sales career. Here is what it covers:

Clickable Contents for Selling Insurance: An Ultimate Guide

Further Reading

Next, these articles can give you the motivation and inspiration you need to find your market, and get selling!

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