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.
How to Get Your Life Insurance Agency Started
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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?)
- 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.
Get Appointed to the Life Insurance Companies You Want to Sell For
Review the Insurance Company’s Portfolio of Products
Select the products you want to offer
Learn All About the Specific Products You Chose
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.
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.