They say to make money you need to spend money, and the insurance industry is no different. Many independent insurance agents make a significant annual income, but you need to pay some upfront costs before that can happen.
If you’re not sure where to start, we can help you figure out just how much money you need to become a licensed insurance agent and start bringing home the bacon.
Here’s a rundown of some of the insurance business start-up costs you can expect!
1. Your Health Insurance License
First things first, you need to get licensed to sell. Depending on your state, you might have to take a pre-licensing insurance education course. That can vary in cost but may be a couple to a few hundred dollars. In Pennsylvania, a life and health preparation course could cost $330. Even if it isn’t required, these courses are also a great way to practice for the actual exam.
When it’s time to tackle the license exam, prices can range anywhere from around between $40 and $150. For example, in Pennsylvania, the exam costs $53 for each attempt. In New Jersey, it costs around $38. After passing the test, you’ll need to apply for your license, with fees ranging from $30 to $200, plus pay a background check fee of around $30 to $50. In Pennsylvania, the fingerprinting fee is approximately $24.
Keep in mind, some states may have a combined life and health license. Additionally, some insurance carriers might require health insurance agents to also have a life insurance license. By getting both simultaneously, you’ll set yourself up to offer a wider range of products and earn more commissions in the future.
“A potential agent would need to have at least a one year of savings in the bank to enter the market and wait for the renewals to kick in!” — Paul Montemayor, Senior Manager of Sales for Florida
2. Errors and Omissions Insurance
Errors & Omissions (E&O) insurance functions as a crucial shield for insurance agents, protecting you from potential legal consequences. Although it’s not technically a prerequisite for becoming an insurance agent, it’s often a requirement set by most carriers before an agent can sell their products.
Typically, an E&O policy can range from $300 to $1,000 annually. Insureon reports the median cost of E&O insurance for insurance professionals is about $45 per month.
Life and health agents with one or more contract through Ritter can purchase comprehensive E&O insurance coverage at a discounted rate through CalSurance. There are multiple E&O options to choose from, allowing agents to purchase only the coverage they need. Annual rates range from about $420 to $730, depending on the coverage level and policy limits. The deductible runs as low as $500 per claim, but a deductible waiver is also available.
This enhanced coverage is tailored to the needs of agents contracted with Ritter, but it even covers contracts that aren’t through Ritter! Get policy specifics or a quote here.
3. Contracting Costs
To start selling health insurance you need more than just a license. You also must be appointed with carriers to offer their products.
The most common costs that occur in the contracting process are state appointment fees. Each state that you choose to work with may charge each of the carriers a fee for filing an agent or agency appointment. In most cases, MAPD and PDP carriers will cover the appointment fees for resident states but require payment in non-resident states.
State appointment fees can vary from no fees to more than $100 per appointment. Some carriers require you to pay up front while others will deduct the fee from your first commission.
4. Education and Training
The insurance world is always evolving, which is why an agent needs to stay educated and on top of it.
AHIP & NABIP Certifications
Licensed insurance agents selling Medicare products must fulfill an annual exam requirement covering the rules and regulations outlined by the Centers for Medicare & Medicaid Services (CMS). Agents may take this course through AHIP or NABIP. The AHIP certification typically costs around $175. The NABIP certification costs $100, and provides agents with access to bonus content and eight continuing education (CE) credits. If needed, you can retry the NABIP exam at no additional cost.
To start selling Medicare plans, you also need to complete various carrier certifications, but there is no cost associated with those.
FFM Certification
If you’re planning on selling Affordable Care Act, or marketplace, plans, you’ll need to complete the Federally Facilitated Marketplace certification. The great part is it’s completely free! FFM training is managed by CMS through their Marketplace Learning Management System (MLMS), and some vendors offer Continuing Education Units (CEUs) for completing FFM training in some states.
Continuing Education (CE)
The insurance market is always changing, and you can keep up with new legislation and rules in the industry through CE credits. Most states require 24 credit hours, including three hours of ethics training, during every two-year license term.
Agents can check out WebCE to take training courses, where you can build your own 24-hour CE package for about $50. There is also a $5 fee per course to report those credit hours. Ask your Ritter sales specialist if you qualify for a CE voucher!
Additionally, professional organizations, like AHIP and NABIP, offer further trainings and certifications or designations for additional costs that vary for members and non-members and based on the course.
5. Marketing Costs
Once you’re officially a licensed insurance agent, you’ll need marketing materials to get your name out there and leads. It’s how you build a successful business and make back that money you used to get started.
Print Media
If you’re running a direct mail campaign, it can cost anywhere from 30 cents to $10 per piece. For example, let’s say the mailers you want are $1 each and you want to send them to 1,000 different people. That adds up to $1,000 for your campaign! At Ritter, we’ve figured out which lead cards work best for Medicare and final expense consumers, and we offer these high-quality direct mailers to our agents at affordable prices. Even better, many of our most effective products can be customized!
You want potential clients to remember your professionalism when they meet you. That’s where business cards come in. It’s also an easy way for prospects to contact you after that first impression. ShopRitterIM has business cards, at 40 cents each, that helps prospects and clients know who you are and how to get in touch with you.
Let’s say you want to get even more personalized. Ritter’s partnership with ReminderMedia gives you access to their unique marketing materials for $99.99 — that’s $200 off! All their designed digital and print marketing materials are customized with your name, photo, logo, and contact info.
Online Media
Our ShopRitterIM materials allow you to easily, affordably, and compliantly market your business, especially when used in collaboration with your own free Shop & Enroll site. In comparison, creating a site through WordPress can range from $48 to almost $800 a year.
6. Technology Costs
Successful insurance agents streamline their business with technology.
Organizing your clients is essential in the insurance industry, and an online client relationship management (CRM) system is an easy way to consolidate all your important client information (names, contact info, addresses, etc.) into one place. Quoting and enrollment tools are also vital to agents.
Many third parties offer technological solutions geared toward agents. One example is NextAgency, which allows you to track your business and manage client benefits. This costs around $600 annually ($570 for NABIP members), and you can add extra features like SMS texting, email campaigns, and commission tracking for additional fees.
Oftentimes, agents can access technology for free through partnered field marketing organizations. Agents registered with Ritter have free access to the Ritter Platform, which includes built-in quote and enrollment tools, commissions tracking, call recording, and client record management.
Despite the costs, entering the world of insurance sales is a rewarding career with the potential to earn returns on your initial investment tenfold!
You’ll be surprised just how much money you’re making and saving, especially when you partner with a trusted field marketing organization like Ritter. We can’t wait to help you position yourself for success in this dynamic industry.
Note: Agents must register with Ritter and have at least one active contract through Ritter to purchase marketing materials on ShopRitterIM.com. Orders will be rejected if both requirements are not met.
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