Are you interested in starting an insurance business? This post will walk you through on what to do before starting an insurance business. Have you gotten a license for the business? Read below to see the steps you need to follow.
Insurance is very important in every aspect of human life, without making appropriate steps to insure our business, properties, health, etc we may have a lot of issues in return. Due to this fact, insurance is another lucrative business to operate.
How to Start Insurance Business
Building an Independent Insurance Agency
Let’s assume you are a licensed insurance agent, if only because that eliminates the first, most obvious step. From there, you’ll need to:
- Write a business plan.
- Choose a legal structure.
- Choose and register your agency’s name.
- Apply for a tax ID number.
- Register your business with the state.
- Get the appropriate business licenses or permits.
- Purchase Errors and Omissions Insurance.
- Select an agency management system.
Take a look at each step below for more details.
Step 1: Write a Business Plan
A sound business plan puts your agency on the right track and communicates your value to current and potential stakeholders, such as the carriers who you want to appoint you. Your business plan should…
- Introduce the people responsible for the agency and executing the plan.
- Explain how you’ll acquire customers and what products and services you’ll provide.
- Identify your target market, suppliers, and competitors.
- Describe the advantage your agency has over your competitors.
- Analyze your risks.
- Include an initial budget, cash flow projections, and a production forecast.
This step is the most important part of building your business. You’ll use this plan to secure financing and loans, hone in on your market, and choose your business location. To get a clearer understanding of what goes into a business plan.
Step 2: Choose a Legal Structure
How you structure your business will determine the amount of personal liability you take on. There are several structures available:
- Sole Proprietorship.
- Limited Liability Corporation (LLC).
- S Corporation.
Each structure has its own risks and benefits. A sole proprietorship, for example, is the simplest structure, but it also carries the greatest personal liability if the business busts. Any business debts you incur can be collected through your personal assets if you don’t have adequate commercial funds.
(Note: With the right business insurance, this won’t be a problem). On the other hand, LLCs and corporations offer a legal distinction between you and your business entity.
For more details, read the US Small Business Administration article “Choose Your Business Structure.”
- How to Choose an Insurance Company
- How to Find a Financial Advisor or Planner
- Qualities of a Good Insurance Agent
- Financial Literacy
- When Should You Hire a Financial Advisor?
- What Do You Mean Advisor’s Designation?
- How to Conduct Your Financial Checkup
- Getting Clients Prepared for a Successful Wealth Transfer
Step 3: Choose and Register Your Agency’s Name
Now you get to have some fun! Agents who choose to be sole proprietors use their own names as doing their “Doing Business As” name. If that doesn’t work for you, pick a name that…
- Conveys your agency’s benefits.
- Avoids cliché.
- Is easily searchable.
Once you settle on a name, register it with your state’s government.
Step 4: Get a Tax ID Number
The IRS requires all businesses to have an identification number to file their taxes. If you are a sole proprietor, you may use our social security number. Corporations and partnerships must apply for a Federal Employer Identification Number.
Step 5: Register your Business with the State
Once you have your tax ID, contact your state insurance commissioner’s office. They will have a checklist for registering as a “resident business entity.” You must do this in order to pay your state and local taxes.
Step 6: Get Your Business Licenses and Permits
Though you are a licensed agent, you may need a general business permit or license to operate legally. You can find which permits or licenses you must carry by using the Small Business Administration’s Business Licenses and Permits tool.
Step 7: Purchase E&O Insurance
As an insurance professional, you already know how important it is to carry adequate liability coverage. This is especially true if you decide to run your agency as a sole proprietorship. Some states may even require you to have Error and Omissions Insurance, or Professional Liability Insurance, to register your business.
Step 8: Select a Client Management System
Whenever you have the opportunity to automate simple tasks, take it. That means you’ll want to invest in top-notch agency management software. A good system allows you to track prospects and service current clients.
If you need a seamless and time-saving system, check out Insureon Solutions’ client management software. You can keep your client data organized in one place, get quick access to multiple carriers using one online application, and save a lot of paperwork and stress.
To learn more about how Insureon Solutions makes your life easier, check out “Alternatives to Direct Appointments for Independent Insurance Agents.”
I hope the article above on How to Start Insurance Business is of great benefit to you.