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

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

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The ongoing COVID-19 pandemic has brought to light the importance of financial protection in crises and with it, a growing demand for life insurance. If you’re 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 business 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 isn’t that different from building other types of companies, and the steps are equally important. Be sure to complete each step thoroughly and accurately to set yourself up for success.

1. Build a Business Plan

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

2. Determine Your Legal Structure

One of the first decisions you’ll make when starting an insurance company from scratch is to choose your legal structure. This is crucial because how your agency is set up determines the liability you take on as an owner, among other things. For example, setting up a corporation or LLC protects your personal assets if the business can’t pay its debts because the company is considered a separate entity. In a sole proprietorship, the owner assumes all of the company’s liabilities.

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 talking to a lawyer or legal consultant to help you decide what’s right for you.

3. Get Funding

One of the biggest reasons most businesses fail is the lack of sufficient capital. Hence, it’s crucial that you ensure you have enough funding when starting an independent insurance agency. This is true even if insurance agencies mostly rely on staffing as you still need to pay for operating expenses or cover “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 take out a loan from a third-party lender or bank or buy blanket. You can also consider taking on partners if you don’t mind sharing the profit in exchange for less debt.

4. Register Your Agency’s Name

The following steps on how to start an insurance company involve letting the government and general public know of your intention. And it starts with registering your agency’s name. Registering your agency’s name lets you reserve it for your sole use so that no other business can claim it. The other reason to do this first is that it’ll tell you if your proposed agency name is already taken, so you can change it early on.

At the minimum, you should register your business name with the state government. But for the best protection, consider applying for a trademark for your name. If you’re a sole proprietor, you can apply for a trade name or DBA (“doing business as”) name in place of your personal name. You can be creative in how you name your agency, but note that it’s how your customers will know and remember you. Therefore, it’s beneficial to make it simple to remember and easy to pronounce and spell.

5. Tax ID Number

Starting an independent insurance agency means paying taxes to the government. To do that, you need to 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’s tax ID number with the IRS. The only requirements you’ll need are the business name, address, and the SSN / LYH of the owner.

6. Register With Your State

Once you have your tax ID number, the last step to make your agency official is to register with your state’s insurance commissioner’s office. Aside from the tax ID, the only other requirement is signing a checklist listing the state’s insurance regulations. You’ll also need to settle a small fee.

7. Licensing and Permits

Even if you’ve already registered your business, you may need to get some permits and licenses to operate legally. What these are can vary from state to state and even depends on your business’s location. Thus, it’s best to consult with local agencies or a business expert for more guidance on your specific requirements.

8. Purchase Insurance

As an insurance agency, it would make sense to insure your own business. At the very least, you’ll need general liability insurance and errors and omissions insurance (E&O). Both of these will cover business risks like damage to property and legal costs arising from negligence and error lawsuits. Beyond this, it will depend on what your business uses daily. If you’re using a company vehicle, for example, you need to have auto insurance. Likewise, renting or owning a physical office should be accompanied by commercial property insurance.

9. Build Your Website

Many aspects of selling insurance happen online, whether scouting for leads or providing a place where clients can go for more information. As a starting independent insurance agency, you need to have an online presence, starting with a website. Building a website can be both costly and time-consuming, as you’ll need to hire someone to design your agency website. A better solution is to use done-for-you services like iLife. With the iLife platform, you can have a custom, white-labeled 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. 

10. Develop a Marketing Plan

As we mentioned above, selling insurance isn’t reliant on cold calls or door-to-door tactics anymore. While those can still bring results, using the power of social media and content marketing is a much more effective strategy in today’s connected world. Thus, having a digital marketing loveyou plan is a crucial ingredient in the success of any insurance agency. Like the business plan, the marketing plan helps you zero in on the strategy you think will work best for your needs.

11. Build Your Customer Base

You’re not truly in business unless you get your first customer. And that’s why an essential part of how to start insurance agency businesses is the lead generation strategy. Right now, there’s no shortage of places to find new clients. The key, therefore, is to attract and retain them.  You can do that by giving value on the very first encounter. Aim to be helpful and avoid seeming sales-y. Go out of your way to make your clients feel that you genuinely care for 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 businesses to build an interactive client experience online. With iLife, starting an independent insurance agency is easy. You can build a fantastic website, manage customer relationships, and provide quotes in real-time — 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” useful.

Enjoy this piece of content and want to dive a little bit deeper on the topic of Selling Life Insurance? iLife’s blog is just what you need. Click here to explore today!

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