Becoming A Licensed Insurance Agent: Steps To Success

Becoming a licensed insurance agent in the US is a state-specific process, with each state having its own requirements. However, there are some general steps that you can take to become a licensed insurance agent. First, you must decide what kind of insurance you want to sell and which type of insurance agent you want to be (captive or independent). Next, you should review your state's licensing requirements, as they can vary significantly. Most states require you to complete a pre-licensing course, pass a state licensing exam, and submit to a background check. Once you've passed your exam, you can submit your license application. After obtaining your license, you can start selling insurance products and building your client base.

Decide on insurance type

When deciding on the type of insurance you want to sell, it's important to consider your interests, the needs of your potential clients, and the market demand for different insurance types. Here are some common types of insurance that agents sell:

Life Insurance

Life insurance agents sell policies that provide financial benefits to beneficiaries upon the death of the insured. This type of insurance can be emotionally demanding as it requires discussing topics like death. It also requires deep knowledge to understand and explain the various policies. However, life insurance offers some of the highest commissions in the industry, and it can be a lucrative option for agents.

Health Insurance

Health insurance agents help individuals and businesses find plans within their budgets. This is a common type of insurance sold by agents, and it includes selling medical, disability, Medicare supplement, and long-term care policies. Health insurance products typically offer commissions in the range of 7% to 22%.

Property and Casualty Insurance

Property and casualty insurance agents sell products that protect against damage or loss to property, such as homes, vehicles, or businesses. This type of insurance is essential for homeowners, car owners, and business operators, leading to high market demand. While consumers tend to seek out low premiums, agents can still earn substantial commissions through frequent policy renewals and updates.

Auto Insurance

Auto insurance, also known as motor vehicle insurance, is a type of casualty insurance. Agents selling auto insurance can expect commissions of around 10% to 15%.

Commercial Insurance

Commercial insurance agents focus on providing coverage to businesses. This includes general liability insurance, commercial property insurance, errors and omissions coverage, worker's compensation insurance, and more. Commercial insurance products often have relatively high policy values, leading to higher earnings for agents. However, these products can be complex, and agents need to have a thorough understanding of the market and individual products.

Final Expense Insurance

Final expense insurance is a type of whole life insurance that covers funeral expenses and other final costs. This can be a delicate topic to sell, but it is a vital coverage type, especially for older adults. Final expense insurance sales agents earn an average income of over $102,000 per year, making it a lucrative option.

Surplus Line Insurance

Surplus line insurance covers unique or unusual situations that aren't typically covered by standard insurance policies. This can include daycare insurance, oil drilling rigs insurance, and special events like state fairs and car races.

Pre-licensing course

To become a licensed insurance agent, most states require you to complete a pre-licensing course. These courses can be taken online or in person, and the duration of the course will depend on the type of license you are seeking to obtain, as well as the requirements of your state.

For example, in New York, the pre-licensing course hour requirements range from 20 hours for a Life Agent license to 90 hours for a Property/Casualty Agent or Broker license. In Texas, a pre-licensing course is not required unless you are applying for a temporary 90-day license, in which case you must complete 40 hours of pre-licensing education.

The National Insurance Producer Registry (NIPR) is a helpful resource for looking up state-specific licensing requirements and fees. It is important to review the requirements of your specific state before enrolling in a pre-licensing course to ensure that you are meeting the necessary qualifications.

After completing the pre-licensing course, you will be ready to schedule and take the state licensing exam. This exam will test your knowledge of the material covered in the pre-licensing course, and passing it is a requirement to obtain your insurance agent license.

Pass the exam

Passing the exam is a crucial step in becoming a licensed insurance agent. The exam will cover both a general section with basic insurance product knowledge and a state-specific section with insurance laws, rules, regulations, and practices unique to your state.

• Enroll in a prelicensing course: Prelicensing courses are designed to prepare you for the state exam. They cover various insurance concepts, definitions, insurance laws, and agent regulations that will be tested on the exam. These courses are offered online and in-person and can provide you with practice exams, study materials, and support to enhance your understanding of the material.
• Dedicate sufficient time to study: Give yourself enough time to prepare for the exam, typically two to six weeks of studying is recommended. Make use of study calendars, practice exams, and other resources provided in your prelicensing course to reinforce your knowledge.
• Understand the exam format and requirements: Familiarize yourself with the format of the exam, which is usually multiple-choice questions. Know the passing score, which is generally a minimum of 70%. Be aware of any identification or other requirements you need to fulfill when registering and taking the exam.
• Take advantage of exam preparation packages or practice questions to familiarize yourself with the types of questions asked and improve your test-taking skills.
• Be mindful of the number of attempts allowed: In some states, there may be a limit to the number of exam attempts within a specific period. For example, in New Mexico, individuals are limited to four exam attempts within a 12-month period, after which they must wait for a six-month period before retaking the exam.
• Stay organized and manage your time: During the exam, manage your time effectively and stay calm. Read the questions carefully and use your time efficiently. If you are unsure about a question, you can mark it for review and return to it later if time permits.

Background check

To become a licensed insurance agent, you will need to pass a background check as part of your state license application. This is because insurance agents are held in a fiduciary responsibility with clients and insurance companies, handling customers' money, and so insurance companies require that agents be trustworthy and competent.

All states will run some form of a background check while reviewing your application. Some states will also require fingerprint data to be taken prior to licensing. This is normally run through a third party and carries a fee of around $30.

The background check will include questions regarding the disclosure of criminal history. Applicants must disclose any previous convictions, including any convictions in an applicant’s adult life that are believed to have been expunged, deferred, or are currently pending. Most states require criminal background checks and may request a full set of fingerprints before an insurance license is issued.

Some states make exceptions for convictions regarding traffic citations, DUI, DWI, driving without a license, reckless driving, or driving with a suspended or revoked license. However, applicants must disclose all convictions, regardless of their age, unless the application specifically states that they are excluded.

If you have a criminal background, it is worth noting that you can still qualify for an insurance license if you have a misdemeanor or felony conviction; however, it depends on the hiring company and the state in which you are applying for a license. Most states have regulations that specifically disqualify persons with convictions involving crimes of moral turpitude, such as fraud, dishonesty, or breach of trust, from licensure.

Submit license application

Once you have passed your state insurance license exam, you are ready to submit your license application. In New Mexico, you can apply for an insurance license through the Vertafore website. The application fee is $30.

To apply, click 'Apply for a license' from the menu on the left, then click the 'New Insurance License' button within the 'New Insurance Licenses' section. Choose 'Resident,' then 'Individual,' and click 'Continue'. Enter your email address, then enter your information and choose the state you wish to apply for a license in. Select 'Resident Agent' as your license type and continue. Select the types of license(s) you wish to apply for, enter all requested information, and submit payment.

Alternatively, you can submit your license application through the National Insurance Producer Registry (NIPR) and pay the required $30 processing fee (plus a small transaction charge). If you answer "Yes" to any background questions on the application, you will need to include a written statement along with the official court documents. It's important to note that all required application materials must be received within one year of passing your state exam.

After you have submitted your application, it will be reviewed. If everything has been filled out correctly, your license should be issued within three to five weeks. This is the typical amount of time it takes for a license application and background check to be reviewed. Issuing your insurance license can take longer if there are any items from your background check that need to be looked over. The state will likely get in touch with you to give some context if they run into any issues.

Frequently asked questions