1. How to Start an Insurance Company: Everything You Need to Know
2. Steps for Starting Your Insurance Company
3. Frequently Asked Questions

How to Start an Insurance Company: Everything You Need to Know

If you want to learn how to start an insurance company, then you’ll need to know the requisite steps that must be taken in order to start operating your business. You can rest assured that operating in this type of industry is ideal, as insurance products are necessary for everyone. In fact, the Affordable Care Act ensures that there will always be a place for insurance companies, for all products including life, health, and car insurance; disability and causalty insurance; and annuity products.

Steps for Starting Your Insurance Company

Personality Test. Believe it or not, this first test is important. Do you have the temperament to handle operating an insurance company? If you plan on hiring employees, will you be a good manager? Do you have the necessary knowledge of insurance products?

Obtain Licensing. The next step would be to obtain licensing. Every state requires that you take 20–40 hours of insurance education courses, and up to 12 hours of ethics courses before you can take the insurance licensing exam. You then must take this exam and pass before you can operate an insurance company, or even work in this industry. You can find these courses online, but keep in mind that these courses are not free, they usually cost around $300–$500 per course.

Plan the Business. You’ll need a solid plan to ensure that you stay on the right track and think about your future goals of the company. The plan should include the following:

  • Identify employees of the insurance agency and how they will assist in operating the business;
  • Identify how you will gain customers, and what specific products you’ll offer;
  • Identify the advantages of your agency over competitors;
  • Analyze risks; and
  • Identify a budget, financial projections, and production for the foreseeable future.

Determine Legal Structure. You’ll need to determine how much personal liability you want to take on. You can operate as a corporation (C Corp or S Corp), LLC, Partnership, or even a Sole Proprietorship. Each specific business structure has its advantages and disadvantages, particularly in terms of tax implications. Therefore, you’ll want to do research on which type of business is best for your end goal.

Choose a Company Name. If you want to operate as a sole proprietor, your name will include the term “Doing Business As.” Remember that you’ll want a name that is easily searchable and easy to remember.

Obtain a Tax ID Number. The next step would be for you to obtain an employer identification number for tax purposes. You’ll also need this identification number prior to opening a business bank account. If, however, you operate as a sole proprietor, you can use your own personal social security number.

Registration. Now you’re ready to register your business within the state you’re choosing to operate in.

Obtain Necessary Permits/Licensing. This is another crucial step as you’ll want to abide by all local/state/federal laws in terms of operation. For example, you may need a general permit in order to operate in the state you are situated. Be sure to visit the Small Business Administration’s website for appropriate licensing and permits.

Frequently Asked Questions

1. What are the start-up costs?

Depending on which state you choose to operate, the start-up costs will vary. Generally, you can expect to pay anywhere from $5,000 to $50,000 to start your insurance business. Several factors in this amount include where you will be located, how you plan to operate, promotional materials, how many employees you will need, what types of products you will offer, and how much your office space will cost.

2. Do I need insurance to run my own insurance company?

Yes. Specifically, you’ll need a Business Owner Policy (BOP) and Errors and Omissions (E&O) insurance. Essentially, E&O insurance is medical malpractice insurance. The business owner policy generally includes both general liability and property insurance into a bundle, covering all aspects of the business itself as well as the property used for running your business.

3. How do I find an office space for my insurance agency?

You’ll want to work with a realtor who can assist you in your specific needs for finding office space suitable for you. You want an exterior that is inviting for potential clients. You’ll also want a satisfactory interior that provides ample space for a reception area, as well as one or more conference rooms to utilize for meetings and other business-related gatherings.

4. Should I use social media to sell my insurance products?

Social media sites are great tools for promoting any business. Whether it be Facebook, Twitter, Instagram, or LinkedIn, you can use these sites to promote your insurance agency, provide information on your products and services, and increase your client base.

If you need help with starting your insurance company, you can post your legal need (or post your job) on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.