Start a life insurance brokerage by following these 10 steps:
- plan your life insurance brokerage
- form your life insurance brokerage into a legal entity
- register your life insurance brokerage for taxes
- open a business bank account & credit card
- set up your life insurance broker’s bookkeeping
- get the necessary permissions & licenses for your life insurance brokerage
- get life insurance brokerage insurance
- define your life insurance brokerage brand
- create your site life insurance brokerage website
- set up your business phone system
Starting a business involves more than simply registering it with the state. We have put together this simple guide to start your life insurance brokerage. These steps will ensure that your new business is well planned, properly registered, and compliant with the law.
step 1: plan your business
A clear plan is essential to success as an entrepreneur. It will help you map out the details of your business and uncover some unknowns. Some important issues to consider are:
- what are the start-up and ongoing costs?
- who is your target market?
- how much can you charge customers?
- what name of your business?
Luckily, we’ve done a lot of research for you.
what are the costs involved in opening a life insurance brokerage?
While it is possible to open an agency with as little as $5,000, the bottom line of the business will benefit from a higher initial investment. start-up costs include the following:
- licenses and certifications – $400-$1,000 – learn how to get your life insurance license here.
- office space – deposit and rent varies by building size and location. Many new agents choose to eliminate all costs associated with opening an office by working from home for the first few years.
- Agency Management System (AMS): The Costs Starters range anywhere from $5,000 to $20,000, depending on the number of users and capabilities you want, with a monthly fee thereafter. While it may be tempting to run your business without an AMS, it is not recommended. Most software packages are designed to ensure legal compliance and keep the agency up to date with marketing, sales, and customer service. A list of ams solutions, along with their qualifications, can be found here.
- Insurance: Meet with an insurance professional to ensure your business needs are met. Commercial insurance, E&O, and a surety bond are sound investments. Policy premiums for these policies vary from state to state, and experience in the industry significantly affects the annual premium.
- Insurance Company Quotes: These rates vary , according to the guidelines of the insurance companies. $50 – $300
- website: In today’s environment, it’s critical that you build an online presence. Depending on the capabilities you want, budget $4,000 to $15,000 for your site creation.
Many new agents choose to buy another agent’s book of business: their client list. While this can prove to be a worthwhile investment, entrepreneurs are encouraged to do extensive research and seek advice to ensure a fair price.
While start-up costs can be as low as $5,000, business owners who achieved early success report investing more than $50,000.
what are the ongoing costs of a life insurance brokerage?
Your ongoing expenses will vary, depending on office location and number of employees. In addition to the standard overhead costs associated with running an office, homeowners should budget for the following:
- Agency Management System (AMS): Monthly fees range from $50 to $300, depending on the needs of the organization.
- Payroll and Incentive Packages: This will represent your biggest expense, but it is also your biggest investment. Invest in your employees and you’ll build a team dedicated to both you and your book of business.
- Continuing Education: Check with your state to determine continuing education requirements. Many of these courses can be taken online, in person, or while attending an industry convention. encourage your staff members to grow in their careers by funding their continuing education.
- insurance company appointment fees
who is the target market?
There are a variety of reasons to purchase life insurance that go beyond paying a death benefit when the insured dies. Get to know the products you sell on a deeper level. Once you’ve gained a clear understanding, identifying your target market will be second nature.
Life insurance products tend to attract a diverse customer base.
How does a life insurance broker make money?
Your brokerage will generate revenue for every policy sold. Upon acceptance of the initial application, the writing agent receives a commission check for a percentage of the total policy premium. You can also expect to receive a smaller commission for each time a customer renews their insurance policy.
how much can you charge customers?
The insurance company establishes both the premiums and the commissions, which vary from one policy to another. commission on policy sales averages between 30% and 70%, with some agents earning 100% of the premium for the first year. the renewal fee is significantly lower, averaging around 5%.
How much profit can a life insurance agency make?
Agency benefits will vary from year to year, with the first few years being the most difficult. after 2 or 3 years, many life insurance agency owners report a strong book of business that generates an average of $130,000 in annual profit.
how can you make your business more profitable?
While it’s possible to make a living selling only permanent and temporary insurance, diversity is the key to success. Consider obtaining the appropriate licenses to offer financial products such as annuities and variable life policies. Health insurance, particularly policies like Medicare supplements and long-term care policies, would help diversify your business portfolio and increase agency profits.
Consider buying in a cluster group, which can help reduce new business requirements and ongoing expenses, such as carrier appointments.
what will you call your business?
Choosing the right name is both important and challenging. If you don’t already have a name in mind, visit our naming a business guide or get help brainstorming a name with our life insurance brokerage name generator
If you operate a sole proprietorship, you may wish to operate under a business name other than your own name. visit our dba guide for more information.
When registering a company name, we recommend researching your company name by checking:
- your state business registrations
- federal and state trademark registrations
- social media platforms
- web domain availability.
It is very important to protect your domain name before someone else does.
step 2: form a legal entity
The most common types of business structures are sole proprietorship, partnership, limited liability company (llc), and corporation.
Establishing a legal business entity such as an llc or a corporation protects you from being personally liable if your life insurance broker is sued.
You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the best LLC services for a small additional fee.
step 3: register for taxes
You will need to register for a variety of state and federal taxes before you can open your business.
To register for taxes, you will need to apply for an ein. It’s so easy and free!
learn how to get an ein in our what is an ein guide or find your existing ein using our ein search guide.
small business taxes
Depending on the business structure you choose, you may have different options for how your business will be taxed. For example, some LLCs may benefit from paying taxes as an S Corporation.
You can learn more about small business taxes in these guides:
- llc taxes
- sole proprietorship vs llc
- llc vs corporation
- llc vs s corp
- how to get started an s corporation
- a corporation vs a c corporation
There are specific state taxes that may apply to your business. Learn more about state sales taxes and franchise taxes in our state sales tax guides.
step 4: open a business bank account & credit card
The use of dedicated business bank and credit accounts is essential for the protection of personal assets.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is known as piercing the corporate veil.
plus, learning how to build business credit can help you get credit cards and other financing in your business name (rather than your own), better interest rates, higher lines of credit, and more.
open a business bank account
In addition to being a requirement when applying for business loans, opening a business bank account:
- separates your personal assets from your business assets, which is necessary for the protection of personal assets.
- makes accounting and tax reporting easier.
open 30 net accounts
Net 30 accounts are used to establish and build business credit as well as increase business cash flow. With a net 30 account, businesses purchase goods and pay the full balance within 30 days.
netmany net 30 credit providers report to the major business credit bureaus (dun & bradstreet, experian business and equifax business credit). this is how businesses build business credit so they can qualify for credit cards and other lines of credit.
get a business credit card
getting a business credit card helps you:
- Separate personal and business expenses by putting all of your business expenses in one place.
- Build your business’s credit history, which can be useful for raising money later.
step 5: set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and itemized accounts also greatly simplifies your annual tax return.
make llc bookkeeping easy with our llc expense cheat sheet.
Step 6: Obtain the necessary permits and licenses
Failure to obtain the necessary permits and licenses can result in heavy fines or even the closure of your business.
status & local business license requirements
Certain state permits and licenses may be required to operate a life insurance agency. Learn more about licensing requirements in your state by visiting the SBA Reference for State Licenses and Permits.
In particular, insurance agencies are generally required to obtain a seller’s license, as most states require insurance agencies to remit sales tax for certain types of insurance products. A seller’s permit allows states to record and collect tax on sales of goods (and sometimes services).
Life insurance agents will also need to obtain a life insurance license, which is administered at the state level. To sell securities-backed insurance products, an agent will also need to obtain their securities licenses from Finra, typically the Series 6 and Series 63 licenses.
Learn more about becoming an insurance agent at staterequirement.com.
In addition, certain local licensing or regulatory requirements may apply. for more information on local licenses and permits:
- check with your town, city, or county clerk’s office
- get help from one of the local associations listed in the us small business association directory. uu. of local business resources.
Step 7: Get Business Insurance
As with licenses and permits, your business needs insurance to operate safely and legally. Business insurance protects the financial well-being of your business in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re not sure what types of risks your business may face, start with general liability insurance. This is the most common coverage small businesses need, so it’s a great starting point for your business.
Another notable insurance policy that many businesses need is workers’ compensation insurance. If your business will have employees, your state will most likely require you to have workers’ compensation coverage.
step 8: define your brand
Your brand is what your company stands for, as well as how the public perceives your company. A strong brand will help your business stand out from the competition.
if you already have a logo you can also add it to a qr code with our free qr code generator. choose from 13 types of qr codes to create a code for your business cards and publications, or to help spread the word about your new website.
how to promote & market a life insurance brokerage
Life insurance agency owners are encouraged to develop their brand, with a marketing strategy built around that brand. Remember, potential customers have a variety of options when it comes to purchasing life insurance. make sure your brand conveys trust and convinces the public that you can best serve their needs.
Agents have achieved success through a diverse marketing strategy that includes neighborhood newsletters, personalized mailings, radio ads, and a strong social media presence. Professional business profiles will also help you establish yourself as an industry leader. Lastly, a strong presence within your community is another great way to build relationships.
how to keep customers coming back
It’s a common misconception that once you’ve sold a life policy, that customer’s needs are permanently met. life insurance leaders build lasting relationships that span multiple stages of life. their needs at 24 are nothing like their needs at 46. it’s your job to guide them along the way. provide each customer with premium service.
Word of mouth spreads whether we like it or not. it’s up to you if your reputation is positive or negative.
step 9: create your company website
After defining your brand and creating your logo, the next step is to create a website for your business.
While creating a website is an essential step, some may fear it’s out of their hands because they don’t have website building experience. While this may have been a reasonable fear in 2015, web technology has seen great advances in recent years that make life much easier for small business owners.
These are the main reasons why you should not delay the creation of your website:
- all legitimate businesses have websites – full stop. the size or industry of your business doesn’t matter when it comes to getting your business online.
- social media accounts like facebook pages or linkedin business profiles are not a replacement for a business website that you own.
- Website building tools like godaddy’s website builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website you can be proud of.
Using our website creation guides, the process will be simple and painless and will take you no more than 2-3 hours to complete.
Other popular website builders include: wordpress, wix, weebly, squarespace, and shopify.
Step 10: Set up your business phone system
Setting up a phone for your business is one of the best ways to help keep your personal and business lives separate and private. that is not the only benefit; it also helps you automate your business more, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to business owners who want to set up a business phone system. we’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the best business phone systems 2022 to find the best phone service for your small business.