5 Things to Know if You Are Thinking of Becoming an Insurance Agent
Insurance is “evergreen.” It’s always in demand. That’s because people need protection from risks every day, year after year, even during a recession. In some cases, insurance is even required by law—the classic example being auto liability insurance.
This is great news if your goal is becoming an insurance agent.
Insurance is a stable industry with lots of income potential, especially if you earn commissions. It’s also a good career choice for people who like flexibility and a certain degree of autonomy.
Being an insurance agent isn’t the easiest job in the world—stress and rejection come with the territory—but if you thrive in high-octane environments and enjoy working with people, you just might love it.
America’s Professor is a leading national provider of comprehensive insurance pre-licensing courses. We’ve helped countless students take the vital first step to becoming an insurance agent: preparing for their licensing exam.
Our expert team has compiled a list of five important things we think you should know if you’re considering becoming an insurance agent in Texas, or any state for that matter. Grab a snack and keep reading.
1: You need a license to sell or even discuss insurance.
All 50 states require you to be licensed to sell insurance or even discuss insurance over the phone. This means even if you plan to work as a (non-sales) customer service rep for an insurance company, you’ll need a resident insurance license at a minimum.
Without a license, you won’t be able to discuss policy coverage, the cost of coverage, or anything specifically related to an insurance policy. The most you’ll be able to do is collect insurance premiums and field calls between licensed agents and customers. In effect, you’ll be limited to administrative duties.
If the insurance company or agency you work for only sells insurance in your state, a resident license should be enough. If they sell insurance in multiple states, things get more complicated.
Say your company has you selling auto and homeowner insurance policies in 20 states in addition to your own. In this case, you’d need non-resident property and casualty (P&C) insurance licenses in those 20 states.
Not to panic! This scenario is more common than you might think, and most large companies/agencies have a dedicated person or department that takes care of insurance licensing for agents and customer services reps.
More good news: Most states will issue non-resident licenses without making you jump through hoops like taking additional pre-licensing courses or state insurance license exams.
2: You need to decide if you want to be a “captive” or an “independent” agent.
Agents—also called Producers—sell policies on behalf of insurance companies. There are two types:
- Captive agents represent a single insurance company—State Farm, for example. The company provides training and support, and the agent agrees to sell exclusively on their behalf.
- Independent agents represent multiple insurance companies. They can sell policies on behalf of several different insurers—as long as they’re appointed; an appointment is a contractual agreement between an agency and an insurer that specifies which types of products the agency can sell and how much commission the insurer will pay for each product.
Both captive and independent agents work on commission, although captive agents often earn a salary, too. They usually make less of a commission than independent agents.
Both captive and independent agents can sell policies from start to finish, including binding insurance coverage. Some contracts may limit an agent’s binding authority for certain products.
Brokers, on the other hand, represent customers, not insurers. They help people find the best coverage for their needs, but they don’t have the authority to issue insurance policies. They must obtain a binder directly from the insurance company or agency.
3: You must be licensed for each “line of authority.”
“Line of authority” is a fancy way of saying a type of insurance. If you sell insurance products—say, life insurance policies—you must be licensed for that line of authority.
It’s possible to get licensed for more than one line of authority, but there are separate exams for each line.
Here are some common lines of authority:
- Life insurance (including whole and term life insurance)
- Health insurance (often bundled with life and/or accident insurance)
- Property insurance (including homeowners and renters insurance)
- Casualty insurance (this type of insurance covers liability losses; property and casualty are often bundled together)
Some states let you apply for a license for a single product, such as life insurance, but many states bundle certain lines of authority together—for example, life, accident, and health—to create a comprehensive license.
4: You may be required to take an insurance pre-licensing course.
Each state has its own department of insurance (DOI), and around half of them require you to enroll in a state-approved pre-licensing education course before you can take your insurance license exam. Most insurance pre-licensing courses are 20-40 hours, but it depends on the line of authority.
Pre-licensing courses are designed to get you well prepared for your insurance licensing exam. Insurance exams are chock-full of concepts and terminology that aren’t common knowledge. In other words, you can’t just wing it and show up to your exam without studying—well, you can, but you shouldn’t!
If your goal is to pass your exam on the first try—which, of course it is—you should enroll in a state-approved exam prep course, even if your state doesn’t require it.
Most people find online courses more practical, especially in the era of COVID. Online courses let you study on your own time and at your own pace. More importantly, you won’t have to take time off from work to sit in a stuffy classroom for a week.
Be choosy about your pre-licensing education provider. Opt for an experienced company that presents the materials in a fun and easy-to-understand way—and one that offers 24/7 access to video lectures and other materials in addition to a comprehensive textbook.
The provider you go with should also offer customer service access in case you have questions or need additional guidance.
5: Some states require a background check and fingerprints.
Around half of all state insurance departments require fingerprints to apply for your license after you pass the exam. Don’t worry, they won’t make you take a mugshot, too!
In some cases, you can get fingerprinted right at the testing center, but, with COVID, you may need to schedule a fingerprinting appointment separately. Most states won’t take fingerprints or run a background check until after you pass the exam. You can find out if your state requires fingerprints through your state’s department of insurance website.
If you have an event in your past you think may impact your ability to get licensed, consider doing a preliminary background check through your state’s Department of Insurance. Check in with the insurance department in your state to find out whether this is an option for you.
AP Helps You Pass Your Insurance License Exam on the First Try
America’s Professor’s Jack Morton has been instrumental in helping countless students prepare for their insurance license exams for more than three decades.
Our system works.
We make learning about insurance easier with engaging video lectures that apply tricky insurance concepts to real-world scenarios.
The vast majority of our students pass their insurance licensing exams on the first try. Check out our reviews and testimonials. When you’re ready to hit the books for your exam, we’ll be here to help.
Ready now? Enroll in a course today.