Thursday, August 03, 2017

How to Build a Successful Life Insurance Agency from Scratch


In this article, I want to share with you how you can start and build a successful life insurance agency from scratch. Building an ordinary life insurance agency is a lost art. There are fewer agents serving fewer people who need life insurance. Building an agency is both something that is tougher and easier to do than at any other time in history.  I'm going to walk you through what you need to know about how to do it below.

Why Start a Life Insurance Agency?

Obviously, becoming a life insurance agent isn't something most people want to be when they grow up. But a life insurance agent is a pretty good job if you learn how to do it right. That's the tricky part.

I'm not going to lie to you and tell you that it isn't challenging. It is. But it's a lot easier than hard manual labor is. That's for sure. Aside from the challenge of finding clients, there are a number of reasons why starting a life insurance agency might make sense for you.

Here they are:

  • Low startup costs The costs to get started are low. You can probably get started for under $1,000-$1,500.
  • Easiest line of insurance to start Many agents want to start by writing other types of insurance like property & casualty insurance also called P&C. This allows you to write auto, homeowners or other types of insurance. But getting started as a P&C agent has stiffer requirements than life insurance only does and many people can't meet those requirements. The main one is that it might require more money to run an operate.
  • Low fixed operating costs Unlike many businesses that might require significant fixed costs that you have to cover each and every month, like inventory and office space, you can get started with a phone, a computer and basic office supplies.
  • No office required While you can have office space if you want, I've ran my own life insurance agency from home since 1995 right from my own home office.
  • No employees required Unless you want to go big, you'd be amazed at how much you can do with no employees. I recommend starting as a solo operation.
  • Not as competitive as you might think Let's face it, the number of life insurance agents is dwindling and will continue to do so.
  • Set your own hours I work pretty much when I want to but I make myself available 24/7.
  • Work from anywhere You can set up shop wherever you are licensed.

Those are just a few of the reasons that starting a life insurance agency is something to strongly consider.

How to Get Your Life Insurance Agency Started

OK. So you've decided you want to start a life insurance agency. What do you have to do to get started? Let's walk through the steps to get set up.

  1. Satisfy your resident state's pre-licensing requirements Every state has a process in place to get licensed. That process starts with what's called pre-licensing. Pre-licensing is the required amount of study you need to do prior to taking the state's licensing exam. I recommend taking both the life, accident and health.
  2. Pass the licensing exam Once you've done your pre-licensing requirements, you need to schedule, pass and take your state's license exam. While your pre-licensing requirements prepare you to take the exam, they don't prepare you to succeed as an agent. 
  3. Pay your licensing fee Once you pass your exam, you pay your state the required fee and they give you a license to write life insurance. You'll have to renew it periodically. As part of that, you'll also have some continuing education as well.
  4. Satisfy any other state requirements to operate You may have to register with your secretary of state and satisfy other requirements in order to conduct business. Every state is different so you'll have to research those additional requirements that may apply. I suggest starting as a sole proprietor at first and at the very least, you might register a doing business name with your state. Keep it simple to begin with. It can be your name and then "insurance" after your name. You can always change the name later and incorporate later.
  5. Purchase errors & omissions insurance (E&O insurance) Insurance companies these days require you to carry insurance in the event you make a mistake. At the time I write this, a $1 million dollar policy is the minimum you should get which will cost you between $600 to $700 a year. Consider getting $2 million in coverage. You can read more about errors and omissions insurance for life insurance agents.

I wrote a whole article that expands more on the how to get your life and health insurance license you might want to check out.

Once you have taken these steps, you can officially write life insurance policies and earn commission but you need an insurance company to write business through. That's the focus of the next section.

Decide What Kind of Life Insurance You Want to Sell

Once you get all set up, it's time to figure out what kind of life insurance you want to sell. When it comes to life insurance there are three specific types of life insurance that you should focus on. A good place to begin reviewing types of life insurance is my guide to life insurance.

The three types are:

  1. Individual life insurance The first type of life insurance you can sell is individual life insurance. This would be term life and permanent life insurance such as universal life and whole life. You could choose to focus on final expense policies, mortgage protection and income replacement. And within these types there are different types of underwriting from no exams to full underwriting. In the end though, you would be focus on individual clients who would buy life insurance directly from you. Learn more about the types of term life insurance and permanent life insurance policies.
  2. Group term life insurance The next type is group term life insurance. Group term life insurance is life insurance that is offered through employers like basic group life and supplemental life insurance. Your target clients would be businesses. (Read more: How does group term life insurance work?)
  3. Worksite permanent life insurance The final segment of life insurance you could offer is what is called worksite permanent life insurance. This is life insurance that is offered to employees of businesses with reduced or eliminated underwriting. The employees pay their premiums through payroll deduction or premium direct deposit. Your target client here would also be businesses.

You could personally build a life insurance agency on one of any three of these lines of life insurance but I think what you should try and do is set up your life insurance agency to build each of these lines of business.

Get Appointed to the Life Insurance Companies You Want to Sell For

The next step in building your agency is to get appointed to the insurance companies you want to sell for. An appointment is an agreement with the insurance company that allows you to represent them. Once they "appoint" you, you can then offer their products.

Appointments to an insurance company can be direct, through a general agent or through independent marketing organizations (IMO's). Another option is that you can be captive to one specific life insurance agency instead of becoming an independent insurance agent.

When I first started I was a captive agent, then I worked through a general agent for a long time and now I am a general agent. Over the years, if I have needed something special, I have also worked with a couple of IMO's.

If I had to do it all over again, I think I would skip being a captive agent and work through a general agent instead. That's because I could work at my own pace and not at the captive's pace. Getting started in the life insurance business has a learning curve and some people can't learn fast enough at a captive to write enough insurance to satisfy the captive production requirements. What this does is basically shut them down before they can get going.

I personally also like to work with one company and give as much business to one company as I can. As a general agent that's what I do.

As an agent, you can take the approach that you want to be able to write whatever life insurance policy your prospect needs or find the prospects that the insurance company you want to work with targets. I prefer the latter of those two.

When I was researching an insurance company I wanted to represent, I looked for one that offered all three product lines I wanted to offer, had a solid reputation and was a mutual company as opposed to a stock company.

Getting appointed is pretty simple once you choose the insurance company. You contact that insurance company to obtain the paperwork, fill it out, provide your license, E&O insurance and anything else they might request. Once they review to make sure you are the kind of agent they want, you'll most likely get appointed unless you have some issues in your financial or personal background.

Review the Insurance Company's Portfolio of Products

Once you get appointed, the next thing you want to do a complete review of the products that company offers. Usually they have a product guide of the products you can sell. You want to look at the suite of products.

At this point, you aren't looking to know everything about each individual product in the portfolio. You want to identify potential products that fit with the three product areas I listed above. 

While the insurance company you get appointed with may offer every insurance product under the sun, you want to keep it simple and stay focused.

Select the products you want to offer

The next step is to select the products you are going to offer. As an example, in my case, on the individual side, I was interested in offering term and whole life insurance but I did not want to offer universal life. 

Even though the insurance company offered universal life, I did not include it the portfolio of products that I wanted to sell.

Choose only the products within the insurance company you want to offer and move onto the next step.

Learn All About the Specific Products You Chose

Once you know which products fit your guidelines, it's time to dig in and learn everything you can about only those specific products. Identify all of the sales material, product specs and any other information you can get your hands on.

In addition to learning about how the products work you also want to learn how to submit clean business to the company and understand their operating procedures.

Now when you do this, it's easy to get hung up on the fact that you might want to know everything before you try and sell everything. Just keep in mind you want to have a good foundation of knowledge when you first start. Once you start getting out there talking to people, you'll expand on that foundation of product knowledge.

Two other important tips I'd give you are to start with one product at time. Term insurance for example is easy to learn than whole life. Start with one product and move on. The second tip is that compliance is important and you want to follow the rules the insurance company gives you

If material is marked "agent use only", then you don't use it with prospects. So in addition to learning about the products, you'll have to stay compliant in how you market those products.

Build and Organize a Database of Prospects

Armed with products and foundation of product knowledge, it's time to identify what type of client you are looking for. What I do is break down each product area and think about the ideal prospect that those products are suited for.

Let's take at look again at the three products lines and what these prospects might look like:

  • Individual life insurance Target families and executives.
  • Group term life insurance Target employer groups with at least 100 employees.
  • Worksite life insurance Target employer groups with at least 100 employees.

Once I've formulated the type of prospect I am looking for, I need to create a database of those prospects that's large enough to work on a daily basis.

This might be 3000 or 4000 individual prospects and 1000 companies that fit my criteria. For each prospect, I will want contact information. Building a database of prospects will take some time and effort. It might be that you buy some lists or research your own. There are people who buy leads of "hot" prospects but I am not a real believer in those.

I then keep this database in a spreadsheet. Nothing fancy because at this point, I want to keep everything simple. 

Create an Offer that Might Appeal to Your Targets and Start Contacting Your Prospects

Up until now, all of the steps we have talked about so far are a piece of cake. The real challenge once you know what you want to sell and who you might want to sell it to, is to start calling people and making offers to them.

So you'll need to sit down and give some thought to what problems you can solve for you clients. That way when you call them, you'll have something specific to say.

Assuming you have a complete database of prospects, the way it will work is you will call each of the prospects and make your offer and let them decide what they want to do. You'll get a lot of voice mails, no answers and no's but you don't want to worry about that. You just want to make your offer to as many people on your list as you can. If they tell you no, then you just move on.

With a large database, you'll try and contact each prospect every three months.

Eventually, you'll warm up your list and people will start talking with you about their life insurance.

Develop a Sales Process that Converts Prospects to Clients and Then Service Those Clients

Once you get people talking to you, you have to figure out how to convert them into buyers. What's involved here is doing a detailed fact finder that helps you understand what life insurance they have, work out how much they think they might need and determine the best policy to help with that.

Now you won't be able to help everyone you get to talk to. That's normal.

What I typically do is find out what they have and if I notice a problem with what they have or a need they might want to fill, I figure out how I would recommend.

The way I approach it is like this. I just want to make sure my prospects know why I would do what I suggest and then I don't get wrapped up into whether they do it or not.

I just focus on making offers.

Those that accept, I write the business, submit it to the company and review what I've set up with on an annual basis.

Keep prospecting and prospecting and prospecting

After you get your first client, you just have to repeat the prospecting step again and again until you get another client and then another. It's simple, yet hard to do at the same time.


To sum things up, a life insurance agency is low cost business you can start. You can offer life insurance to individuals and businesses. It's fairly easy to get set up and get appointed. Once you learn about the products you want to sell, the hard work is finding clients.

In fact, finding clients is what your whole day will be.

Hopefully, this outline of how to build a life insurance agency from scratch was helpful and as I get time, I'll go into more detail about each step.

If you start your own life insurance agency, I want to hear about how it is going. Let me know in the comments how it is going or if you have any questions. I am always looking for agents to work with and am happy to help.

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Michael is a champion of guaranteed issue for employees in the workplace. He's been an insurance agent since 1992 and has worked with thousands of employees.