How to Become an Insurance Agent

One of the necessities of life, especially if you want to protect your assets, is insurance. Just about everyone needs home and auto insurance policies, and it’s a good idea for those with dependents to purchase life insurance.

Instead of just buying insurance policies, though, it can make sense to get involved in selling insurance. After all, insurance agents are in an industry in which nearly everyone participates. Even if someone never buys a long-term care policy, or some of the other types of insurance, the reality is that some insurance is required. Anyone who drives a car is required to have auto insurance, and now, thanks to the PPACA, most people are required to have health insurance.

insurance agent

You can’t just pick up and start selling insurance policies, though. There are requirements involved to become an insurance agent:


There are no formal education requirements for insurance agents. However, many companies that hire agents like their representatives to at least have some college education. (The “right” person for the job, however, might be hired regardless of education situation.)

But getting hired isn’t the only requirement for insurance agents. All states have their own licensing requirements that insurance agents have to go through in order to be properly credentialed. Find out what the state licensing requirements are.

Most states require some sort of class or course. The length and rigor of the course depends on the state. After you finish with the class, you generally have to take a licensing exam. You will need to receive the proper state licensing for each state that you plan to sell insurance in.

Once you are licensed, you can decide where you want to work, and whether you want to start your own agency. Be aware that there might be additional business and licensing requirements if you want to open your own insurance brokerage. Research the possibilities before you get started on your journey.

Captive vs. Non-Captive

After you figure out how to become an insurance agent, you need to decide whether you are going to work with one company only, or whether you will decide to work with multiple insurance companies.

  • A captive agent sells policies from one company only. As a captive agent, you might receive better commissions on certain policies offered by the company in question. However, you might lose out on sales.
  • On the other hand, a non-captive insurance agent sells policies from multiple carriers. This means that you can help your clients find the best possible deal, choosing from a variety of options from different carriers.

Getting Paid as an Insurance Agent

Getting paid as an insurance agent usually means that you have to sell policies. You can receive anywhere between 30% to 90% of the premiums paid during the first year the client has a policy, and then receive between 3% and 10% of the paid premiums each year after that. Here’s an example:

You’re an insurance agent and you sell a $500,000 term life policy to a client. The premium is $30 a month, or $360 a year. During the first year, the company pays a commission of 85%, so you end up with $25.50 a month from that policy. Subsequent years, though, you only get a 5% commission, so your monthly income from that policy is $1.50.

As you can see, it’s important for an insurance agent to be able to bring in new clients. In many cases, the most money is made in the first year of the policy, so marketing is a big part of making sure that you get paid. And, of course, products that come with higher commissions and premiums can also make a big difference.

The nice thing about being an insurance agent, though, is the fact that, even though you might not be making as much in subsequent years, you usually don’t have to do a lot to maintain your clients’ accounts. As long as there aren’t a lot of claims, and as long as your clients pay their premiums on time, the income is fairly regular. But you do have to keep selling new policies in order to make a good income as an insurance agent.

Photo credit: Jennifer Feuchter.

About the Author

By , on Aug 14, 2013
Miranda Marquit
Miranda is a professional personal finance journalist. She is a contributor for several personal finance web sites. Her work has been mentioned in and linked to from, USA Today, The Huffington Post, The San Francisco Chronicle, The New York Times, The Wall Street Journal, and other publications. She also has her own personal finance blog: Planting Money Seeds.

Leave Your Comment (One Comment)

  1. Andrew Hime says:

    the days of insurance agents are coming to a close. If this were anywhere near true, I might still be working at an insurance agency instead of getting laid off 3 years ago.

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