Getting An Auto Insurance License: Steps To Success

Getting an auto insurance license is a straightforward process that can be completed in a few weeks. The first step is to decide which type of insurance you want to sell, such as auto, health, or property insurance. The next step is to complete a pre-licensing education course, which can vary in duration depending on the state. After that, you'll need to pass the relevant state insurance exam, which covers general insurance and state-specific topics. Once you've passed the exam, you'll need to complete a background check and submit your license application. Finally, you'll need to get appointed by an insurance company to sell their products. The entire process can be completed quickly, and you'll be on your way to a rewarding career as an insurance agent.

Check state-specific requirements

Each state has its own set of procedures for applying for an auto insurance license. These requirements vary depending on the type of insurance, known as the "line of authority", that you intend to sell. While the exact procedures vary, many states require applicants to complete pre-licensing training courses, pass an exam, and submit to fingerprinting.

Step 1: Choose Your Insurance Line of Authority

The first step is to decide which types of insurance policies you want to sell. This is important because your choice will determine the type of license you need to obtain. For example, if you want to sell auto or home insurance, you will need a Property and Casualty license. Most insurance agents opt for either a Property and Casualty license or a Health and Life license as they allow them to offer a wider range of insurance products.

Step 2: Complete a Pre-Licensing Education Course

While this step is only mandatory in some states, it is recommended to complete a pre-licensing education course regardless of your state requirements. The number of hours required for pre-licensing education varies by state, with most states requiring between 20 and 40 credit hours.

Step 3: Pass the Relevant State Insurance Exam

After completing your pre-licensing education, you will need to pass the relevant state insurance exam. Each line of authority will typically have its own unique test, consisting of two components: one on general insurance and the other on state-specific knowledge. These tests usually consist of 50 to 200 scored questions and have a duration of two to three hours. A passing score is generally around 70%.

Step 4: Complete a Fingerprint and Background Check

In almost all states, you will need to submit your fingerprints for a state and federal background check before filing your application. This process is typically completed in person through approved providers and costs around $25 to $50. While certain felonies may permanently bar you from licensure, having a criminal record does not necessarily exclude you from becoming an insurance agent, depending on the state.

Step 5: Submit Your Insurance License Application

The final step is to submit your insurance license application, usually through the National Insurance Producer Registry (NIPR). This step is typically accompanied by a filing fee, which can range from $20 to $150 depending on the state and the lines of authority you are applying for. The processing time for your application will vary by state, ranging from a few weeks to a few months.

State-Specific Requirements:

Now, let's look at some specific requirements for a few states:

• California: California allows fingerprint impressions to be submitted at any time before taking the license examination, even before submitting the license application. The state also has specific requirements for different types of insurance licenses, such as Life-Only Agent (LO), Accident and Health (AH), Property Broker-Agent (PR), and more.
• Michigan: In Michigan, applicants must submit their application immediately after choosing an insurance line.
• Vermont: In Vermont, applicants are not required to complete a background check.
• Alabama: In Alabama, the pre-licensing education requirement is 20 hours of general education plus 12 hours of ethics training.
• Arizona: In Arizona, no fingerprinting or background check is required, but applicants must provide two forms of identification at the exam.
• Florida: Florida requires 40 hours of pre-licensing education for a license in life, health, property, and casualty insurance.

These are just a few examples of how state-specific requirements can vary. It is important to carefully review the requirements for your specific state before initiating the licensing process.

Choose a captive or independent agent career path

There are two main types of insurance agent: captive and independent. Both have their pros and cons, and it's important to understand the differences between them before deciding which career path to choose.

Captive Agent

Captive insurance agents work for a single insurance company, also known as a carrier, and sell only that company's policies. They are usually considered full-time employees or independent contractors, but they will specialise in and have in-depth knowledge of the products.

Pros of being a captive agent

• The start-up costs can be non-existent, as captive agencies often support their agents with administrative tasks, staffing, office space, and even reimbursement for pre-licensing education and licensing exam fees.
• Captive agents are paid by the agency, usually with a base salary, commissions, and benefits.
• Large-scale marketing is provided by the parent company, so there is no need to spend time and money on creating marketing materials.
• Captive agents receive carrier support, such as 24/7 customer service and claims for their clients, as well as ongoing training opportunities.
• Instant brand name recognition and trust from clients due to the association with the parent company.
• A consistent source of income, which can be beneficial for those starting out in the industry.
• Captive agents usually receive an array of training, administrative work, incentives, and other motivational programs from their carrier.

Cons of being a captive agent

• Captive agents are bound to one insurance carrier, so they may offer customers coverage options that are not in the best interest of the client.
• Captive companies can place sales quotas on their agents, which may not align with the client's needs.
• The commission rate is lower than that of independent agents, as captive agents also receive a base salary and benefits.
• Depending on the company, captive agents may be required to sign non-compete contracts, which can impact future career moves.
• Limited insurance product selection, as captive agents can only offer what their company provides.

Independent Agent

Independent agents may be appointed by multiple insurance companies, or they may be self-employed or work for an independent insurance agency or brokerage. They have the freedom to choose the policies that best suit their clients' needs and budgets.

Pros of being an independent agent

• Access to a wider range of policies, allowing them to offer clients more options and better deals and rates.
• Higher commission per sale than captive agents, leading to a higher earning potential.
• Control over work hours, with the option to work part-time or from home.
• The ability to be your own boss and conduct business however you want.

Cons of being an independent agent

• Higher startup costs due to the need for more affiliations, licenses, office space, and marketing expenses.
• The commission is the only source of income, so independent agents may need to work more than 40 hours a week or maintain another job when starting out.
• Independent agents must create their own marketing plans and build trust among clients without the support of brand awareness.
• More up-front costs and risks, especially if opening their own business, including managing a book of business, hiring additional employees, and rental costs.
• Hustling to satisfy clients due to the lack of in-depth knowledge of specific companies' policies.

Both career paths have their advantages and disadvantages. Captive agents enjoy the stability and support of a single insurance company, while independent agents have more freedom and earning potential but face more risks and expenses. The choice depends on your personal preferences, lifestyle, and career goals.

Complete pre-licensing education

To obtain an auto insurance license, you'll need to complete pre-licensing education for your line of authority, which is determined by the state in which you plan to operate. This typically involves taking a pre-licensing education course, which is a mandatory requirement in some states. The number of hours required for these courses varies by state, ranging from 20 to 40 credit hours. For example, in Georgia, the pre-licensing course for a Property and Casualty license is 40 hours, while the Life Only course is 20 hours.

When choosing a pre-licensing education course, you'll need to decide between a live, in-person course or an online interactive video course. Online courses offer the advantage of flexibility, allowing you to complete the course at your own pace and often providing the option to repeat material if needed. On the other hand, live courses may be preferable for those who need the structure and reinforcement of a classroom setting.

It's important to select an approved course provider, as you'll typically need to present an original completion certificate from an approved provider when you arrive at the test centre for your insurance license exam. The cost of these courses can vary, but generally, they range from $75 to $150.

In addition to the course content, you may also want to consider factors such as the teaching methods used, the availability of instructor support, and the availability of practice exams and quizzes to enhance your learning experience.

Pass state exam

Passing the state exam is a crucial step in getting your auto insurance license. Here are some tips to help you prepare and increase your chances of success:

Know the Exam Format

The format of insurance state exams varies and is usually a timed, proctored multiple-choice test consisting of around 50 to 180 questions. The length of the exam depends on the state and the license type. The exam is typically administered by third-party testing companies like Pearson VUE or Prometric, and it is conducted at standardized testing facilities on a computer with an assigned proctor.

Understand the Content

The state exam will cover both national and state-specific content. The national section focuses on general insurance knowledge, including different policy types and guidelines. The state-specific portion will test your understanding of your state's statutes, rules, and regulations, including state-specific regulations related to insurance, insurance commissioners, and fiduciary responsibilities.

Prepare with Practice Exams and Study Strategies

Taking practice exams is an excellent way to familiarise yourself with the exam format and types of questions. Organise a dedicated study space, use flow charts and diagrams to visualise information, and explain your answers to others to reinforce your understanding. Additionally, maintain a healthy study routine by taking regular breaks, exercising, staying hydrated, and snacking on nutritious "brain food."

Test-Taking Strategies

When taking the exam, employ strategies such as reading the last sentence of a question first to understand what it's asking and predicting your answer before looking at the choices. If you're unsure, eliminate answers you know are incorrect, and trust your intuition when choosing between two options. Remember that you can always skip a question and come back to it later if you're running out of time.

Know What to Bring

On the day of the exam, remember to bring the required identification and, if applicable, a completion form from your education company. You won't be allowed to bring study materials, personal items, or electronic devices into the testing room.

Understand the Passing Score

In most states, you need a score of 70-75 to pass the exam. Some states may have slightly different passing scores, so be sure to check the requirements for your specific state.

Be Aware of Retake Policies

If you don't pass the exam on your first attempt, don't be discouraged. Review the sections you struggled with and reschedule when you feel more prepared. Each state has different rules regarding retakes, so be sure to familiarise yourself with the policies for your state.

Submit license application

Once you've completed your pre-licensing education, passed your state exam, and undergone a background check, it's time to submit your auto insurance license application. Here's a detailed guide on how to do that:

Understand the Application Process:

Before you begin, familiarize yourself with the application process for your specific state. Each state has its own requirements, forms, and procedures for submitting a license application. Check your state's Department of Insurance website for detailed instructions and a list of required documents.

Complete the Application Form:

You can typically find the license application form on your state's Department of Insurance website. Fill out the form accurately and completely. Provide all the requested information, including personal details, educational background, and any relevant work experience. Be honest and transparent when disclosing any disciplinary actions or criminal convictions. Omissions or inaccuracies can lead to delays or even denial of your application.

Gather Supporting Documents:

Along with the completed application form, you will likely need to submit additional documentation. This may include proof of your pre-licensing education, exam results, background check report, and fingerprint impressions. Check the requirements for your specific state to ensure you have all the necessary documents.

Submit the Application:

In most states, you can submit your application online through the National Insurance Producer Registry (NIPR) website. Some states may also accept applications through their own dedicated portals or allow non-resident applicants to apply through the NIPR. Follow the instructions provided by your state's Department of Insurance for submitting the application and paying the associated fees.

Pay the Application Fee:

Submitting your license application typically requires paying a fee, which can range from $20 to $150, depending on your state and the type of license you're applying for. Check the fee schedule provided by your state's Department of Insurance to determine the exact amount. Payment methods may include credit card, electronic funds transfer, or paper check.

Await Application Processing:

After submitting your application, all that's left to do is wait. Processing times vary by state and can range from a few weeks to a few months. During this time, your state's Department of Insurance will review your application and supporting documents. They may contact you if they require additional information or clarification.

Receive Your License:

Once your application has been approved, you will receive your license number and National Producer Number (NPN). You will need these numbers when applying for jobs in the insurance industry, so keep them handy. You can now start your career as an auto insurance agent, adhering to the regulations and continuing education requirements of your state.

Remember that the specific steps and requirements may vary depending on your state, so always refer to the official sources and guidelines provided by your state's Department of Insurance.

Frequently asked questions