How to Start a Life Insurance Company: The Steps You Need to Take

How to Start a Life Insurance Company? In the event, you are interested in insurance, and you are thinking about building your own company, knowing how to start a life insurance company can be quite handy knowledge. Just like other businesses, starting off may not be easy or smooth. But if you are able to prepare the crucial elements, it would make the process easier.



Understanding What Is Life Insurance

So, what is life insurance? If you want to learn how to start a life insurance company, you need to understand its difference from the other insurance types. In case you don’t know it, there are tons of different various insurance types, like health insurance, car insurance, house insurance, property insurance, and others.

Life insurance is basically a ‘contract’ between the insurer (the company) and the policy owner (the person agreeing the policy and be responsible for paying the premium). The life (insurance) policy makes sure that the insurer would pay an amount of money to the (named) beneficiaries when the insured dies – it is done for the exchange of the paid premiums that is being paid by the (policy) holder during their lifetime.

The insurance must disclose the insured’s health conditions (past and current) along with the high risk activities to make the contract solid, legit, and valid. So, in short, life insurance is a (legally binding) contract paying the death benefit to the policy owner when the person insured dies. For the insurance to remain valid, the holder must pay one premium upfront or regular premium over time. When the insured passes away, the named beneficiaries would get the death benefit or face value.

There are different types of life insurance. The term insurance would expire after several years, while the permanent insurance would remain active until the insured themselves stop paying the premiums, die, or surrender the policy. The life insurance policy is only as trusted or good as the company’s own financial strength. In the event the issuer can’t pay claims, then state guarantee funds may be responsible for the claim payments.

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Starting up a Company

A lot of people view the insurance business as a lucrative business; no matter what. In North America or European countries, insurance is extremely important for the citizens’ life and well-being. That’s why there are many insurance types out there, from home to cars. However, if you are interested in making your own business in insurance, then you should know how to start a life insurance company properly and correctly. Behind the lucrative world, there is a world that is pretty challenging and difficult.


Know Your Niche

Although you can always sell different kinds of insurance types, you may be in luck with a particular niche. If you want to focus on a particular niche, you are on the right path. After all, you have chosen a life insurance to start off. Now, the next thing you need to do is to:

  • Have deep knowledge of the possible risks. In most cases, the challenges and risks are pretty obvious. But when you gain experience, your ability would improve, including risks evaluation
  • Gain the best advantage when compared to other competitors. Clients would choose an agent who becomes an expert within the industry, and the one who knows it all about the sector.
  • Raise the standing point. When you are able to get clients the proper policy within a decent cost, it would be a good way to help you get positive reputation. Others would see you as their go to agent for this sector.
  • Earn referrals. When you are able to grow your reputation, (more and more) clients may likely send new leads to your way.

insurance business


Perform a Thorough Research

It’s crucial to know at least the basic facts about the industry that you are focusing. If you have worked as an insurance agent, then you may have a good knowledge of the business and it can be a crucial point in your business portfolio. But if you haven’t, then you should know (and learn) the industry. An intimate understanding of the insurance types and products is needed. It would be even better if you can combine it with sales and marketing savvy, ambition to succeed, and impressive management skills.

Knowing how to start a life insurance company can be a good point, but you should also know that it can be challenging as well. Your clients, especially the beginners, would depend on you. They would entrust your expertise and knowledge to help the pick the right products. Not to mention that they also lean on you during their vulnerable times. You are basically their safety net. It’s crucial that you should take the responsibility and then be willing to handle those pressures – without actually showing them that you are having a lot of things in your plate.


Make Your Business Plan

Business plan is crucial. In fact, it’s one of those crucial steps in how to start a life insurance company. Just like other businesses, you may need investors to fund your company. A business plan can create a difference whether your business will get the fund you need or not. If you are planning on having stakeholders, you need to realize that they want to understand how your company would be beneficial for them. How are you going to make them money? How do you bring them clients? How would you differentiate your company from the other companies within the area? Moreover, drafting the business plan would ‘force’ you to think about your vision, especially for the future of your business and how you would execute that vision.


Get a License

Do you know that you need to have a license to have your company? Getting a license is one of the steps in how to start a life insurance company. In fact, you need to have a license first if you want to start a company. In America, you should get the license from NAIC (National Association of Insurance Commissioners). They are the organization regulating the insurance industry. Be advised that the process  to obtain your license would be long and tedious. It would be time consuming! You need to get a license for each insurance type you want to sell as well as getting the license for every state that you want to be in.

Before you are given the license, passing an exam is a must. But you need to go through a coursework which may be up to 50 hours of study time. Not to mention that these courses are quite costly. The cost ranges from $300 each to around $500. And you still need to deal with the application fees for taking the exams. In the event that you intent to sell variable life insurance or annuities, it needs different (and separate) coursework as well as testing. Those coursework and tests would be supervised by FIRA (Financial Industry Regulatory Authority). You may also need a different (and separate) licensing if you want to start an agency instead of a sole proprietorship.


Plan the Finance

If you read the previous section, you may need to prepare a lot of money to start the business. Budgeting and planning the cost should be included in the preparation on how to start a life insurance company. It’s true that insurance business can be lucrative, but only after it runs and operates – and become successful. When you start out, tons of upfront capital would be needed, especially if you want it to succeed. Not to mention that there are so many different elements that can determine how much capital needed, including the location, business model, and such things alike. If you are a sole proprietor working out from home without any support staff member, the capital would be minimal. But if you plan on creating a bigger agency, you definitely will need more money to cover staff salaries, office space, staff, and others.

So, how is your vision of the future business? You may have to start from $5,000 to around $100,000 to get the business going. When you plan out the finance, you need to prepare a ‘safety net’ that would protect your operating costs, at least until you have steady income. When you have come up with specific numbers, you should be able to invite investors or secure a (small business) loan.


Make Partnerships with Insurance Carriers

Make Partnerships with Insurance Carriers


Affiliating your business with an insurance carrier is crucial, especially in business sector. Insurance carriers would affiliate themselves with only certain insurance companies selling the products. In most cases, you should prove your self-worth to those carriers before they would give you access to their services and products. It typically works when you have shown them your business plan, along with your current clients.

Getting access to carriers would be one crucial step in how to start a life insurance company. How are you supposed to sell products if there is no product to sell? It’s imperative that you show your commitment in getting several customers on a monthly basis, especially for this carrier, so you are ‘allowed’ to sell their products. It would be handy to have the experience in the field (at least a few years) before you finally sign the deal with the carrier.

Some agencies may choose to work with a cluster group, which is basically a bigger association of (independent) agents working together, making them qualify to work with the most elite and the biggest carriers. This can be useful for many good reasons, but joining a cluster has its own perk: you can quote and also bind faster. If you work with a ‘normal’ wholesaler, it may take you between 24 hours and 48 hours. It can affect your performance as it would slow down the number of policies to sell within a certain period of given time.


Introduce (and Promote) the Business

So, you have created a business plan. You have got your legal licenses too. You have gained access to various insurance products. It’s time to open your shop up. But no one would be coming to your door if they don’t even know that you are setting up a shop. It’s time to introduce your business and promote it. This is when marketing is needed. After all, marketing and sales are crucial parts on how to construct a business.

You can start from your network. Simply let them know that you are opening a business, so they know your business presence. And since now is the era of technology, you can make use of technology to start off. You can set up a blog or even the official website. You can also make use of your social media to promote and expand.

In the end, setting up a life insurance company is just the same as setting up other business companies. But once you know the exact steps of how to start a life insurance company, you should be able to hit it off quite smoothly.

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