A Complete Guide On How To Start An Insurance Company

Are you a successful insurance agent right now? If so, then you might be interested in knowing how to start an insurance company of your own. Well, starting a new insurance company is quite a …

How To Start An Insurance Company

Are you a successful insurance agent right now? If so, then you might be interested in knowing how to start an insurance company of your own. Well, starting a new insurance company is quite a complicated task.

You need to have the right focus and swat equity to make your dreams come true. Therefore, here are the basic steps for starting a new insurance company.

  • Come up with a proper business plan.
  • Decide a legal structure for your business.
  • Suggest a suitable name for your company and register it.
  • Collect your tax ID number.
  • Register the company with the state.
  • Get the necessary permits and licenses for your company.
  • Buy insurance for investment protection.

Now, let’s look at these steps in detail and learn how to start an insurance company. 

The 7 Common Steps For Starting Your Insurance Company

1. Come Up With A Proper Business Plan

How To Start An Insurance Company

Having a proper business plan before starting a new insurance company keeps your goals on the right path. The business plan will illustrate your commitment to multiple experts including insurance carriers, investors, experienced employees, and potential stakeholders. 

A proper business plan also will assist you in setting your goals, finding out the resources and financial requirements, avoiding potential roadblocks, and identifying certain risks involved in your business. 

So, you can say that it is perfect guidance once you launch your new insurance company or insurance agency. Here are the other perks of having a business plan before you start a new insurance agency.

  • It will introduce the persons who are involved in the business.
  • It will illustrate how you can get your new customers, the services, and the insurance products your company will be selling.
  • It can help you find out your suppliers, target clients, and potential competitors. 
  • It covers the initial budget for your new start-up.
  • A business plan will analyze the risks as well. 

So, basically, a business plan is the road map of a new insurance business. 

2. Decide A Legal Structure For Your Business

How To Start An Insurance Company

The amount of your personal liabilities depends on the business structure you choose. Here is the list of the multiple business structures you can select for your business.

  • Corporation
  • S Corporation
  • Partnership
  • Sole Proprietorship
  • Limited Liability Company or LLC

Now, every business structure involves certain benefits and risks as well. For example, if you select sole proprietorship as your business structure, you will have the easiest business structure. However, in this condition, you will have to carry your greatest personal liabilities. Also, you will put your assets at great risk.

On the other hand, you can have a legal distinction between you and the business entity if you go for corporations or LLCs. these business structures are costly and complicated. But they can give your personal liabilities strong protection.   

3. Suggest A Suitable Name For Your Company And Register It

How To Start An Insurance Company

Once you have successfully finished the business plan and chosen the right business structure, it is time to give a suitable name to your company. 

Your name will become the name of your new insurance business if you have chosen the business structure of sole proprietorship. Here, you might select a DBA or Doing Business As name as well. 

But in other structures, you need to give a suitable and creative name to your company. Here are some basic rules while giving a name to your company.

  • The name of the company should be easy to spell and speak.
  • The name should be compatible with the requirements of your state.
  • It should illustrate the services of your company.
  • The name should be easily searchable.

Be aware of the rules and regulations of your state while naming your agency.  

4. Collect Your Tax ID Number

How To Start An Insurance Company

 A FEIN or Federal Employer Identification Number will be required for the business structures like partnerships and corporations to file taxes. This FEIN number will be also required when you open a bank account or issue a credit card.  

You can use the Social Security Number if your business structure is LLC or sole proprietorship. 

5. Register The Company With The State

How To Start An Insurance Company

After getting the tax ID number, you should immediately talk to the Insurance Commissioner of your state. Your company should be registered as an entity of the resident business in your state. This will be also required for local tax purposes. 

You will have to bear nominal fees for registration. After that, your state will give you a checklist to ensure that you know all the rules and regulations of the state and follow them thoroughly. 

6. Get The Necessary Permits And Licenses For Your Company

How To Start An Insurance Company

You will require a general business license or permit even if you are a licensed insurance agent. Make sure you are following all the rules and regulations of your state. 

7. Buy Insurance For Investment Protection

How To Start An Insurance Company

The assets and structure of your business will determine the type of insurance you will require. Purchasing insurance for your business will save it from multiple risks.

For example, General Liability Insurance protects your company from any kind of injury or property damage. Professional Liability Insurance or Errors and Omissions Insurance gives you protection against any lawsuits or oversights. 

When you have an office space, you can choose Commercial Property Insurance. It will protect you against stolen, lost, or damaged business property.  

When you select Cyber Liability Insurance, you will get protected against any harmful software attacks or data breaches. Here, the cost includes legal fees and fines, customer notification, and credit monitoring. 

How To Start An Insurance Company: Pro Tips

The 7 steps that are discussed in the earlier section are the basics for developing your own insurance agency. But, you need to be quite advanced to grow your new start-up fast.

Here are two pro tips that will help you when you start your new insurance company or insurance agency. 

1. You Should Maintain Good Relationships With Other Insurance companies.

This is a marketing policy that always helps a person when he or she is about to start a new company. You should start building good relationships with other insurance companies even though you are still an insurance agent. 

Maintaining a good relationship with other companies helps you increase your experience in this particular field. This way you will be able to understand the market, several new insurance policies, and a lot more things. 

Now, when you start your own insurance company, you will be able to build a strong network as well. 

2. Form Your Own Customer Base

You should start building your own customer base when you are an agent of insurance. This way you will have a good network and when you start your own company, they can be your first customers. 

To increase your customer base, you may advertise in the local market, participate in multiple networking events, and join the Chamber of Commerce. 

Having your own client base includes multiple perks. You do not need to hustle much after starting an insurance company. 

How Much Should It Cost To Start An Insurance Company?

You will have to bear an average of $13,000 if you want to start an insurance company of your own. However, the cost can be increased up to $24,000 or more depending upon your business model. 

Here, the total cost includes business formation fees, software and website expenses, freelancer and employee cost, office space expenses,  and the cost of marketing and advertising. 

Compare Quotes From Trusted Carriers With Insureon

Insureon is one of the leading independent online marketplaces for insurance companies around the world right now. Insureon deals with the online delivery of insurance to small businesses. 

Currently, Insureon owns the license in 50 major states. It is specialized in multiple fields, ranging from restaurants to IT professionals. Insureon has top-rated and prominent carriers from the United States. 

Now, if you want to compare the quotes from trusted carriers in Insureon, you need to finish the easy application of Insureon online. They will help you find out the right policy for you. Also, you will be able to start your coverage within 24 hours. 

Frequently Asked Questions

1. How do you start a local insurance company?

Here are the steps for building a new local insurance company.

  • Have proper knowledge of the insurance industry.
  • Do feasibility studies and market research.
  • Come up with a good business plan.
  • Concentrate on the right niches.
  • Choose the proper structure for your new insurance company.
  • Be aware of your potential competitors.
  • Be aware of the potential threats.
  • Give a creative name to your company.
  • Form your own customer base. 

2. Are insurance agencies profitable?

Yes. insurance agencies or insurance companies are profitable. But their profit is based on the amount of return on their investment, the number of payouts after the clients’ claims, the number of premiums, and business costs.  

3. Who is the highest-paid insurance agent?

Gideon Du Plessis is considered the highest-paid insurance agent in the world right now. Gideon Du Plessis is from India.

However, he is working in a wide range of regions nowadays. Therefore, his annual commission is around $70 million. He has been maintaining his record by selling 700 policies till now. 

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