Becoming An Auto Insurance Agent: Your Step-By-Step Guide

Becoming an auto insurance agent is a great career path for those seeking flexibility and a diverse roster of clients. While the requirements to become an auto insurance agent vary by state, it can often be achieved in just a few weeks. Here's a step-by-step guide to help you get started:

1. Decide on the Type of Insurance Agent: Choose between being a captive agent, working exclusively for a single insurance company, or an independent agent, working with multiple insurance providers.

2. Select Your Insurance Products: Determine whether you want to focus on commercial insurance, serving businesses, or personal lines of insurance, catering to individuals and families.

3. Review Licensing Requirements: Familiarize yourself with your state's licensing requirements, as these vary depending on your location and the products you intend to sell. The most common license types are Property and Casualty and Life, Health, and Accident.

4. Complete a Pre-Licensing Course: Enroll in and complete a pre-licensing education course to fulfill the educational requirements for obtaining your license. These courses can be taken online or in a classroom setting.

5. Pass the Licensing Exam: After your pre-licensing course, schedule and pass the relevant state licensing exam. This exam will test your knowledge of insurance principles and state regulations.

6. Submit Your License Application: Provide all the necessary documentation, including a background check and fingerprints, to your state licensing department.

7. Get Appointed by an Insurance Company: Seek appointment by an insurance company to gain the authority to sell their products as their sales agent.

8. Build and Maintain a Client Base: Start prospecting for clients, beginning with your network of friends and family. Develop a marketing strategy, such as creating a website or joining local organizations, to promote your business.

9. Protect Your Business with Insurance: Ensure your agency is protected with the appropriate insurance coverage, including general liability, errors and omissions, workers' compensation, commercial auto, and cyber insurance.

Decide on the type of insurance agent you want to be: captive or independent

When considering a career as an auto insurance agent, it's important to understand the difference between captive and independent agents. This distinction will significantly impact your work experience and income potential. So, what's the difference?

Captive Insurance Agent

Captive insurance agents work exclusively for a single insurance company and sell only that company's policies. They are usually under contract with an insurance carrier and receive a regular salary, along with commissions on the policies they sell. One of the main advantages of being a captive agent is the support provided by the parent company. This includes administrative staff, office space, and marketing budgets, which independent agents often lack. Additionally, captive agents benefit from the broader marketing strategy of the insurance company, which can provide instant brand name recognition and trust from clients.

However, there are also disadvantages to being a captive agent. Captive agents have a limited selection of insurance products to offer their clients, as they are bound to the parent company's rates and policies. They also typically earn lower commissions compared to independent agents and have less autonomy in making business decisions, as they must follow the rules set by the parent company.

Independent Insurance Agent

On the other hand, independent insurance agents work with multiple insurance companies and can offer their clients a wider range of insurance products. They have greater control over how they run their business and can shop around for the best policies to meet their clients' needs and budgets. Clients often appreciate the custom service they receive from independent agents. However, independent agents do not have the same level of support and brand recognition as captive agents. They are generally responsible for their own overhead costs, including marketing and licensing expenses, which can result in higher startup costs.

Making the Choice

Both options have their advantages and disadvantages, and the decision ultimately depends on your personal preferences and career goals. If you value stability, the support of a parent company, and consistent income, then becoming a captive agent may be more suitable. On the other hand, if you prefer having more control over your business, offering a diverse range of products, and having a potentially higher earnings ceiling, then the independent agent route may be more appealing.

Choose which insurance products to sell

When deciding which insurance products to sell, you should first be aware of the two main types of insurance agent: captive and independent.

Captive Insurance Agent

Captive agents work with only one company, usually a large national insurance provider. The captive company provides training and support to the agent, who then represents the company's products exclusively and cannot sell policies for competitors. Captive agents are often required to sign a non-compete agreement and may receive lower commission rates based on the marketing support provided by the carrier.

Independent Insurance Agent

Independent agents work with multiple insurance companies and provide clients with policy quotes from a range of providers so they can find the best policies and prices. Independent agents have more flexibility in their product offerings but receive less training and support from insurance carriers. They must also build their own brand in the market rather than relying on the reputation of a well-known insurer, which can make the path to becoming an independent agent more challenging.

Commercial Insurance

Commercial insurance agents focus on providing coverage to businesses. Policies include general liability insurance, commercial property insurance, and errors and omissions coverage.

Personal Insurance

Personal lines of insurance focus on coverage for individuals and families, including motor vehicle insurance, home insurance, and life insurance.

Property and Casualty Insurance

Property and casualty insurance agents serve clients who need auto, home, and business casualty insurance.

Life, Health, and Accident Insurance

Agents selling life, health, and accident insurance serve individuals who need insurance and annuities related to life events such as life insurance, accidents, or health insurance.

Surplus Line Insurance

Surplus line insurance covers unusual situations with risks not addressed by standard insurance.

Variable Products Insurance

Variable products insurance has an investment element and requires a FINRA Series 6 license to sell.

Choosing Your Products

When deciding which insurance products to sell, you should consider your own interests and expertise. For example, you might be particularly interested in helping individuals and families, in which case personal insurance products would be a good fit. Or you might prefer to focus on one specific type of insurance, such as auto insurance, and become an expert in that area.

You should also consider the level of support you will need when starting out. While captive agents benefit from more training and support, independent agents have more flexibility and can offer a wider range of products.

Review state-specific licensing requirements

The requirements to become a licensed auto insurance agent vary from state to state. It is important to review the specific licensing requirements for the state in which you plan to operate. In California, for example, the process involves completing pre-licensing education, passing a state licensing exam, getting fingerprinted, and applying for the license.

The number of hours of pre-licensing education required varies across states. In California, the Life and Accident and Health license, which is the highest line of authority, requires 52 hours of pre-licensing study. If you are applying for more than one license and have already completed the necessary 12 hours of Ethics and California Insurance Code, the required number of hours is reduced to 40. Other states, such as Alabama, do not have any pre-exam training requirements for certain licenses.

After completing the required pre-licensing education, you will need to pass a state licensing exam. The number of questions on the exam will depend on the type of insurance license you are seeking. In California, the exam consists of 75 to 150 questions. It is important to check with your state's insurance department for specific exam requirements.

Some states, like California, require fingerprinting as part of the licensing process. The California Department of Insurance allows fingerprint impressions to be submitted at any time before taking the license examination, even before submitting the license application. Be sure to review your state's specific requirements regarding fingerprinting.

Once you have completed the necessary pre-licensing education, passed the state licensing exam, and fulfilled any additional requirements such as fingerprinting, you can submit your license application. The application process may vary depending on your state, so be sure to review the guidelines provided by your state's insurance department.

Take a pre-licensing course and exam

To become an auto insurance agent, you'll need to take a pre-licensing course and pass the subsequent exam. The pre-licensing course will prepare you for the exam, which you must pass to obtain your insurance license. The specific requirements for the course and exam may vary depending on your state and the type of insurance license you're seeking.

In California, for example, the pre-licensing course requirements differ depending on the license type. For instance, the Life and Accident and Health license, which is the highest line of authority in the state, requires 52 hours of pre-licensing study. However, if you're applying for multiple licenses and have already completed the required 12 hours of Ethics and California Insurance Code, the required hours drop to 40.

On the other hand, in New York, the pre-licensing course requirements are set by the NYS Insurance Law. For instance, those seeking a Property/Casualty Agent license must complete 90 hours of pre-licensing education, while a Life Agent license only requires 20 hours.

To ensure you're well-prepared for the exam, consider enrolling in a reputable exam preparation course or program. These programs are designed to provide you with the knowledge and skills needed to excel in the insurance industry and increase your chances of passing the exam on your first attempt. Some providers offer flexible learning options, including live online classes, OnDemand online courses, and self-study programs, allowing you to choose the best fit for your budget and learning style.

Once you've completed your pre-licensing course and feel ready, you can schedule and take the licensing exam. The exam will assess your understanding of the material covered in the pre-licensing course, and passing it is a crucial step towards obtaining your insurance license and starting your career as an auto insurance agent.

Submit your license application and background check

Once you've passed your state insurance license exam, you'll need to submit your license application and background check. This process can vary depending on your state, but there are some general guidelines to follow.

Firstly, find out your state's specific requirements. Each state has its own license application process, which can usually be completed online. The fee for submitting your application will depend on your state but can range from $30 to $200. Some states require you to submit your application before taking your exam, while others allow you to do so afterward. Check with your state's Department of Insurance for the correct procedure.

As part of the application process, all states will conduct some form of background check. Some states will also require fingerprint data to be submitted prior to licensing. This is typically done through a third-party service and incurs an additional fee, usually around $30. Schedule an appointment with a fingerprinting service, such as IdentoGO, and be sure to send a digital copy of your fingerprints to the relevant state departments.

It's important to note that you may have to wait up to two weeks for your license to be issued once your exam and background checks are complete. During this time, you can start prospecting for clients by writing your own insurance and reaching out to friends and family. This will help you get comfortable with quoting new coverage and understanding how the systems work.

Frequently asked questions