Like every other business, starting an insurance agency can seem daunting. However, if you are determined and stay consistent, it will yield more lucrative results than working for another insurance company. It’s challenging — but not impossible.
To help you embark on this journey, we have created this guide to help you understand how to start an insurance agency from home.
It’s best to familiarize yourself with every aspect of the career and each step to starting a business, so let’s go over each facet in detail.
Table of Contents
Get Your License
If you’ve decided to start your insurance agency, you must have an insurance agent license. Apart from that, you may also require a general business license. Every state and many counties and cities each have their own rules and regulations for how to go about this, so a good place to start is with your local municipality’s website.
Check out our guide to becoming an independent insurance agent and also these steps on how to become an insurance agent.
For Sole Proprietors
Your municipality’s website will have all the instructions on how to apply for the general business license. You will need to register the name of your business, or your name, on the state government’s website. Upon successful registration in your name, you’ll receive a tax ID as the sole proprietor.
Additionally, fill in your social security number for that purpose.
It’s important to note that not all states require that you register a sole proprietorship. For example, California residents are not required to register their businesses as sole proprietors if they are operating under their own name.
For example, in Texas, you would go to your county clerk’s office and register a DBA (Doing Business As) to establish any brand name for your company. This allows you as an individual sole proprietor to operate as a brand name.
For Corporations and Partnerships
In the case of corporations and partnerships, you’ll receive a Federal Tax ID once you apply for a Federal Employer Identification Number. This tax ID allows you to pay local and state taxes after setting up your business.
Before you start your business as an insurance agent, make sure that you research a registered agent service and check the review on Venture Smarter to know which one works best for you.
Funding or Capital Requirements
This is another crucial concern when we talk about how to start an insurance agency from home. Truth be told, capital requirements are really up to you.
Just as personal expenses are unique to every individual, so are business expenses. That’s why it varies greatly for different people.
Some independent insurance agents require just $5,000 to start an agency at home while others may need as much as $50,000! The type of insurance you are planning on providing may be a big factor.
Reason for Variable Capital
You may choose to lease a storefront space or an office to begin your venture, which will certainly cost you some extra money.
On the other hand, if you intend to open an office at your home, you won’t have to pay to rent office space elsewhere. Moreover, home office furniture will significantly reduce your initial capital investment.
Funding requirements also differ from state to state. For instance, it will cost you a lot more to rent a space in New York City compared to Biloxi, Mississippi.
So, if you have a tight budget, it’s probably best to go for a home office. It can function perfectly well as per your expectations.
Getting Your Home Office Insured
You need to get your home-based insurance agency insured! Especially in the case of a sole proprietorship, liability coverage in the form of Business Owner Policy (BOP) is essential. It is required by most states to get Error and Omissions (E&O) and Professional Liability Insurance for your business. In case you miss something or make an error, the E&O insurance coverage protects you!
These requirements are important ones to register your agency. If you decide to hire support staff for your business, you may also opt for worker’s compensation insurance.
Deciding the Legal Structure
Your liabilities depend upon the legal structure of your business. You can choose any of the following legal structure for your home-based insurance agency:
- S-Corporation
- Limited Liability Corporation (LLC)
- Corporation
- Partnership
- Sole Proprietorship
Each type of structure has its pros and cons.
For instance, the greatest personal liability lies with sole proprietorships. However, a sole proprietorship is the simplest structure and is also the easiest to get off the ground. That said, if your agency goes out of business, debt collectors will come for your assets. This loss primarily restates the significance of getting your agency insured!
On the other hand, there is a clear, legal distinction in the case of the LLCs and Corporations and this extra protection may be beneficial.
Does Location Matter?
Yes, it does! It’s an important factor to understand how to start an insurance agency from home.
If your home is not located close to your customers, you may want to purchase an office instead. Like every other business, it is important to be in the vicinity of your clients to ensure their convenience (and your access to customers, of course!).
One potential idea: instead of placing your insurance agency near business centers or malls, locate a more client-friendly place that hasn’t been exploited yet. A quick Google search will help you situate rival insurance agencies’ locations. Use this search to decide where not to buy an office.
Whether it’s a home-based office or a commercial space, it should be near customers and not in an area already saturated with insurance agencies.
Regardless of the location you choose it will be important to follow best practices for selling insurance from home and time management when working from home.
Where and How to Find Clients?
You can use many different ways to find clients.
For you to become a successful independent insurance agent, you must become a marketer as well. This skillset is important to create brand recognition.
Primarily, there are two sources: online and offline. Both are indispensable when we talk about how to start an insurance agency from home.
Let’s find out about online marketing channels first.
Online Channels
Don’t shy away from using different content types such as blogs, social media posts, and videos on varied platforms! Search engine optimization is also a great practice to get into.
Here are some ways to boost your online presence:
Send newsletters to prospects to gain their attention but do not spam them with too many emails. Fix specific weekdays as well as time to send emails. Do some research to figure out when your customers are most likely to open their emails.
In most cases, it’s during business hours. Further, create social media pages and a website for your insurance agency. However, make sure that each medium has the same business name, signature, and logo. With time, your clients will be able to recognize your agency just by the logo itself!
Similarly, having a website is essential to get visitors through both organic and paid traffic and convert them into high-quality clients. Besides, including customer testimonials on the website will work wonders for your credibility.
For two-way communication, use social media to the fullest. Make time to engage with your existing clients and prospects on social media. Ensure they feel valued and validated by your interactions.
More exposure will help you tap a wider customer base as well. As you expand your business, you can go for other methods such as Search Engine Marketing.
Offline Channels
Here are some of the offline marketing techniques imperative for your business:
- Referrals
- Associations
- Advertising
- Print publications
- Networking
- Cold calls
- Trade shows
- Speaking engagements
Networking is pivotal for an independent insurance agent. We advise you to join various associations or organizations, host events and participate in trade shows to get connected with your peers. Though they may be your competitors, there’s a good chance that you will get referrals from these events and associations. So, it’s worth your time, effort, and money to be a member as well.
And remember how we talked about capital requirements before? Some of these methods may or may not be feasible for you in the initial phases. However, as you earn enough money, you can opt for television advertisements, print publications, and more in the future!
Investing in a Management System
So far, we’ve figured out where and how to find clients for your insurance agency. However, you need a lot more than that!
Your budget should also include the cost of a management system. As you acquire more clients, it’ll become impossible for you to manage all of them manually. It will do more harm than good for your agency.
So, to truly understand how to start an insurance agency from home, invest in an agency management software to benefit long-term.
Cost and Functions of an Agency Management System
You need to perform certain administrative activities and tasks daily. Through automation, you can save yourself a lot of time on these tasks. Well, not just that! You may be able to automate specific customer service tasks, sales, facilitate marketing, and ensure compliance with the laws of your state.
As a beginner, you may not have enough knowledge about the crucial facets of an independent insurance agency such as legislation. So, investing in an agency management system will prove quite useful to you.
A typical agency management system costs somewhere between $50 and $300 every month; however, it’s entirely possible that it could cost thousands more depending on large your business grows.
Ultimately, your software expenses will depend on the number of features you require. Though intimidating, you can rest assured knowing it will pay for itself eventually!
Importance of a Cash Reserve
It’s a good thing to be optimistic. Every business owner wants to start profiting right off the bat. However, it takes perseverance and sometimes even failure to rise to the top. Trust us when we say that it’ll take some time to get the ball rolling. Have patience, survival is really the key to the insurance business.
So, your startup costs must include a cash reserve that can support your business for a few months at least! You need cash reserves to pay salaries, utilities, rent, and other expenses in case you don’t make sales for a while. However, if you don’t make sales initially, don’t give up.
It’s good to have a safety net that can sustain your dream before your insurance agency begins to start profiting!
Choose a Niche
What type of insurance are you planning to sell as an independent insurance agent?
While you can always choose to sell multiple insurance products, choosing a niche will help you reach a more targeted audience. Is it life insurance or auto insurance? Whatever you pick, it’s important to keep tabs on your competitors and see how they approach their customers.
If you already have a domain in mind, stick to it. Don’t change it if you don’t find initial success. Only change your domain if your competitors are irreplaceable and your home-based insurance agency can’t gain substantial market share.
Even then, give yourself enough time to make the final decision!
Leverage Cross-selling
To learn how to start an insurance agency from home, you must leverage cross-selling opportunities that come your way. There is a decently high chance that your client may purchase multiple policies from you if you make it convenient for them. Yet, it does not happen very often. Can you guess why?
It’s because most insurance agents don’t even ask! It is as simple as that.
Simply asking your clients if they want to look at other policies or refer you to their friends and family will do wonders for your business. It will not only get you new clients but also boost your grassroots marketing.
How to Cross-Sell?
Good question! The best way to cross-sell is to create incentives, discounts, and packages for clients; especially your loyal ones.
You should use an insurance CRM that helps you identify cross-selling opportunities. Insurance CRMs typically have features built in to help you cross-sell more insurance policies.
When you identify an opportunity to cross-sell an insurance policy to one of your existing clients it becomes your job to reach out to them and explain the benefits.
Staying top of mind with your existing customers through email marketing is a great way to make it easier to cross-sell when the time comes. Your existing contacts will be much more receptive to your outreach efforts if they have been consistently seeing your brand and getting value through your email communications.
When Will Your Agency be Profitable?
Did you know that across the board startup companies on average take 2-3 years to become profitable?
So, don’t put too much pressure on yourself right away, you’ll need to allow yourself a few months or perhaps a year or longer to let your home-based insurance agency get off the ground and become profitable. This means planning financially.
When your business becomes self-sustainable and you generate enough income to cover all of your expenses you will begin to see profitability.
You should feel some pressure starting out, that is normal, but plan financially so that you don’t worry about going out of business, at least not for a few months. Focus on growing your business, increasing your clientele, strengthening your online presence, and the financial results will follow.
Going Forward
Starting any type of business really only takes one dedicated person with a vision.
That is you, my friend.
As long as you know what you want to build in your business and stay dedicated, you can do it.
Believing in yourself and staying consistent with your work is sure to attract the right people you’ll need to grow your business along the way.
It is worth noting that we are currently observing the economic effects of the COVID-19 pandemic worldwide. This crisis is not the first or last precarious situation that we will face in our lifetime.
Even during this time, if you are persistent in your efforts, you will create a steady, recession-proof business. All you really need is patience and perseverance to succeed.
Thus, we conclude our guide on how to start an insurance agency from home. Now it is your turn to take this information and turn it into action.
