Steps To Becoming An Auto Insurance Agent

Becoming an auto insurance agent is a career path that allows for flexibility and a diverse roster of interesting clients. The requirements to become an auto insurance agent vary by state, but they can often be completed much faster than other professions that require a license. To become an auto insurance agent, you will need to decide between two types of insurance agents: captive and independent. Captive agents work with only one company, while independent agents work with multiple insurance companies. The next step is to decide which insurance products you will sell, such as commercial or personal insurance policies. Then, review your state's licensing requirements and take the necessary insurance license exam. After passing the exam, submit your license application and background check, get appointed with an insurance company, and start finding and maintaining clients.

Decide on the type of insurance policies you want to sell

When it comes to deciding on the types of insurance policies you want to sell as an auto insurance agent, there are several options to consider. Here are some detailed suggestions to help you make an informed choice:

Auto Insurance:

As an auto insurance agent, offering auto insurance policies is a natural choice. Almost every state requires drivers to have auto insurance, and even in states where it is not mandatory, drivers are held financially responsible for any damage or injuries they cause in an accident. You can choose to sell different types of auto insurance policies, such as liability coverage, which pays for property damage and injuries caused by the insured to others in an accident. Another option is uninsured/underinsured motorist (UM) coverage, which covers medical expenses, lost wages, and pain and suffering if the insured is hit by an uninsured or underinsured driver.

Life Insurance:

Life insurance is another important type of insurance that many individuals and families rely on. It provides financial protection for survivors in the event of the insured's death. You can choose to sell term life insurance, which offers coverage for a specific period, or permanent life insurance, which provides lifelong coverage and includes a cash value component. Consider the needs of your target market and whether they would benefit more from short-term or long-term coverage.

Health Insurance:

Health insurance is essential for protecting individuals and families from the financial burden of medical bills and unexpected illnesses. You can help your clients obtain health insurance through their employers, the federal health insurance marketplace, or private insurance companies. It is important to understand the different options available to your clients, including high-deductible health plans and Health Savings Accounts, to ensure they get the coverage they need at a price they can afford.

Home Insurance:

While not required by law, home insurance is crucial for protecting one of the most valuable assets for many individuals – their homes. You can offer dwelling coverage, which protects the structure of the home and attached properties, personal property coverage for belongings, and liability coverage in case the insured accidentally causes injuries or property damage to others. Remember that standard home insurance policies often exclude damage from floods or earthquakes, so you may also want to offer separate insurance for these specific scenarios.

Disability Insurance:

Disability insurance is often overlooked, but it is an important type of coverage for individuals who become unable to work due to sickness or disability. It supplements a portion of the insured's income, typically replacing 40% to 70% of their base income. You can help your clients understand the different options, such as group disability insurance through their employer or individual disability policies purchased privately.

Complete a pre-licensing course

To become an auto insurance agent, you will need to complete a pre-licensing course. This is an essential step in obtaining your insurance license. Most states require you to complete such a course, which can be done online or in person. The National Insurance Producer Registry (NIPR) is a helpful resource for checking state-specific requirements and fees.

The time commitment for pre-licensing courses varies depending on the state. In California, for example, the Life and Accident and Health license requires 52 hours of pre-license study, while other licenses require 40 hours if you've already completed the necessary 12 hours of Ethics and California Insurance Code. In New York, the number of hours ranges from 20 to 90 hours, depending on the type of license. For instance, a Life, Accident and Health Agent license requires 40 hours, while a Property/Casualty Agent license demands 90 hours of study.

Pre-licensing courses are designed to prepare you for the insurance license exam. They cover the necessary knowledge and skills you'll need to sell insurance and provide a comprehensive learning experience. You can choose from various course formats, including live online classes, OnDemand online courses, and self-study programs, allowing you to select the option that best suits your budget and learning style.

After completing your pre-licensing course, you'll be ready to schedule your official licensing exam. These exams are typically administered by an outside company at a designated testing site, and you will need to provide proof of your completed training before taking the test. The exam usually follows a multiple-choice format, and you'll immediately know whether you've passed or failed.

Pass the relevant exam(s)

Passing the relevant exam(s) is a crucial step in becoming an auto insurance agent. The exams are usually administered by a third-party testing company, such as Pearson VUE, and are taken on a computer at one of their testing centres. The exams are typically in a multiple-choice format, with a mix of definitional, numerical, and practical application questions. The exams are challenging, covering a broad range of topics, and require focused preparation.

Exam Format and Content:

The insurance licensing exams consist of two parts: the "national" insurance section and the "state" section. The national section focuses on general insurance concepts and is standard across all states. The state section covers state-specific regulations and may vary in difficulty and level of detail. The exams are typically in a multiple-choice format, and students report that the questions fall into three main categories: definitional (approximately 1/3 of the questions), numerical/day-related (approximately 1/3 of the questions), and practical application or story problems (approximately 1/3 of the questions).

Passing Score:

To pass the insurance licensing exam, you will need a score of 70-75 in most states. However, the passing score may vary slightly between states, so it is essential to check the requirements for your specific state.

Exam Registration and Scheduling:

It is recommended to register for the exam by calling the testing company (e.g., Pearson VUE) rather than signing up online. Scheduling the exam at least three days in advance is advisable to increase the likelihood of getting your preferred test date.

Exam Difficulty:

The insurance licensing exams are challenging, and each type of exam (Life, Health, Property, and Casualty) presents its own set of difficulties. For example, Health insurance exams are often considered more complex than Life insurance exams due to the intricate nature of health insurance policies. Similarly, the Casualty insurance exam, which deals primarily with liability insurance, can be more abstract and harder to grasp than the Property insurance exam, which covers more tangible issues like fire, flooding, and earthquakes.

Time Allocation:

Students typically have more than enough time to complete the insurance licensing exam. Most finish in about half of the allotted time, which can be up to 3.5 hours. There is no need to memorise answers or try to review specific questions after the exam, as this is not allowed by the testing centres.

Test Preparation:

There is no substitute for knowing the material when it comes to passing the insurance licensing exam. A structured and disciplined approach to exam preparation is essential. A recommended four-step process includes:

• Watching and listening to lectures or instructional videos.
• Highlighting key concepts in the study text.
• Reviewing questions in the test bank to reinforce understanding.
• Reaching out for clarification or assistance if needed.

Retaking the Exam:

In the event of not passing the exam on the first attempt, it is important to review the feedback and identify areas for improvement. Most states allow retakes, with some limiting the number of attempts or imposing a waiting period between exams. It is crucial to check the specific rules and requirements for your state.

In summary, passing the insurance licensing exam is a critical step in becoming an auto insurance agent. The exam covers a broad range of topics and requires focused preparation. Understanding the exam format, content, and structure will help you approach the exam with confidence. Remember to follow a disciplined study plan, utilise effective test preparation strategies, and stay calm during the exam. With dedication and persistence, you will be well on your way to a successful career as an auto insurance agent.

Complete a background check

To become an auto insurance agent, you will need to complete a background check as part of your license application. This is because insurance agents are held to a fiduciary responsibility, handling customers' money, and insurance companies require that agents be trustworthy and competent to handle such monies.

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

The background check will include a criminal history check. Applicants must disclose any previous convictions, including any convictions in their 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, convictions must be reported regardless of their age, unless the application specifically states that they are excluded.

In addition to the criminal history check, some states may also require you to disclose other background information, such as administrative actions or child support information. For example, California has approved a new non-uniform background question that requires the disclosure of criminal convictions involving the abuse or oppression of elders and dependents. This will appear on all individual and business entity license applications and renewals, and a conviction of this kind will be grounds for application denial and license non-renewal in California.

Submit your insurance license application

To become an auto insurance agent, you will need to submit your insurance license application. This is the final step in the process of becoming an insurance agent. The exact steps to do this vary depending on your state's specific regulations. For example, applicants in Michigan must submit their application straight after choosing an insurance line, while those in Vermont are not required to complete a background check.

In most states, you will submit your application to your state's Department of Insurance. This is normally completed through the National Insurance Producer Registry (NIPR) and will be accompanied by a filing fee. This fee can range between $20 and $150, depending on the state you are based in and the lines of authority you are applying for.

After you have submitted your application, all that is left to do is wait. Processing times vary from state to state, ranging from a couple of weeks to a few months. Once the review is complete, the state will send you an email containing your license number and National Producer Number (NPN). You should always be able to show your state insurance license if asked. When applying for a new job within the insurance industry, your employer will ask for your license number and NPN.

It is important to note that the processing time for your application may be longer than the estimated time if the State Department runs into any issues with your background check or is faced with a particularly busy period.

Frequently asked questions