Starting your own insurance company is a real deal, but the only thing you need to know is where to shift your focus and how you can turn your dream into a reality.
Whatever reasons you have for starting your own insurance business, it can definitely be an excellent investment, but just like any other type of business, it requires commitment and we’ll show you how to do so in this article.
1. Outline your business plan
When it comes to starting your own insurance business, outlining your business plan will serve as a guide and show if you’re on the right track or not. This document will demonstrate the commitment you have to investors, employees, and even insurance carriers.
Your business plan will help you outline your goals, avoid all the roadblocks you’ll encounter along the way, identify risks, and determine all financial requirements. Above all, your business plan will serve you in the long-term and will guide you after your insurance business is launched.
Your business plan doesn’t need to be in-depth, but only include the following information:
- Outline what’s involved in the business and who is responsible for it;
- Explain your plan for acquiring customers and the type of insurance you’ll provide;
- Identify your target market and competitors;
- Outline what makes you stand out from your competitors;
- Analyze your risks;
- Include your initial budget that covers your upfront costs.
Your business plan helps you build up your business and secure your financing.
2. Understand more about the insurance industry
Before diving deeper into the insurance industry, it’s important to understand how the insurance industry operates. There are different types of insurance companies and they include:
- Life insurance: Provides financial support to beneficiaries upon the policyholder’s death. After that, no further financial support will be provided.
- Health insurance: Covers all medical expenses that are associated with families and individuals.
- Auto insurance: Protects all vehicles that are involved in theft or accidents from any major financial losses.
- Homeowners insurance: This offers financial coverage to homes in case of a natural disaster (tornado, earthquake, flood, etc.).
- Commercial insurance: Protects businesses from any property damage, liabilities, and any other risk-associated activities.
Before you take any further steps to start your insurance business, you need to make sure that you know which category you want to be in. All insurance businesses serve one purpose, and that is to save civilians from major costs, but not all of them operate in the same direction.
3. Choose your business legal structure
Your business legal structure determines the number of personal liability you take on. There are different types of business legal structures that exist and they include:
- Sole Proprietorship (SP)
- Partnership
- Limited Liability Company (LLC)
- Corporation
- S Corporation
Each business structure comes with a set of benefits and risks. A sole proprietorship is the simplest structure and is when someone runs a business on their own. It has the most liability and in this case, you’re using your own assets to pay all of your debts.
Partnerships, on the other hand, are similar to SPs, but this involves two or more people in the business. Liabilities are shared and this helps reduce stress for both sides, but of course, profits are limited and shared between two or more parties involved.
Corporations and LLCs operate quite differently and are much more complex, but do provide protection for your personal assets in many cases. Regardless of which legal business structure you choose to go with, it’s all up to you.
4. Choose a name for your insurance business
Choosing a name for your insurance business is always something you should never leave behind. After you’re done with your business plan and finding out which business structure your business belongs to, it’s now time to focus on brainstorming a name.
If you are running your business as an SP (on your own), this means that your business name will depend on you. You can always consider choosing a “doing business as” (DBA) name. This will come down to your creativity and you can even get the help of other people in your team when it comes to choosing your business name. Above all, your name should be:
- Easy to spell
- Don’t copy any other insurance business
- Isn’t challenging to remember
Keep in mind that some states might even restrict you from using certain names. These names are the ones that might mislead groups of people. For example: Using names that promote illegal activities, “bank”, “Insurance”, “University”, etc.
Many new business owners who are struggling to find a name for their business are also now using the help of Artificial Intelligence. This is by using AI name generators, and the good side of these tools is that they will never give you a name that copies others or is hard to remember. The most important part of choosing a good name is to make sure that it’s memorable.
This saves you time from having to brainstorm names on your own and getting straight to the point.
5. Build a website
When running a business, in most industries, you’ll need to have your own website. This is better for you since you are showcasing what your business has to offer and even allowing customers to book meetings with you.
As technology continues to evolve, there are now many ways you can create your own website, and the best part is that it’ll all depend on what you are aiming for. You can follow traditional methods to create your own website by hiring a web developer. Professional web developers are great at setting up your website, but when it comes to analyzing it from a startup perspective, it might become problematic since costs are high and the time it takes to set up your website is long (a few months).
On the other hand, you can create your website by using Artificial Intelligence (AI). This includes using AI web builders to do all the work for you in a short period of time. These tools can give you a website in under one hour!
Nevertheless, they only cost a few bucks to subscribe on a monthly basis, and even if you choose to go with the more advanced plans for any tool you use, you won’t be paying more than $50-$100 monthly.
This means that it’s a bigger win for new entrepreneurs since most of the time, they’re on a tight budget and want to closely analyze how they spend their money.
7. Acquire a tax ID number
Your tax ID number is required by the IRS and it’s the number that will help you go further when you visit a bank and want to open your own business bank account or credit card.
If you are running a business with two or more people, you’ll be required to use a Federal Identification Number (FEIN) when you file your taxes. As for other business legal structures, all you need to do is use your own social security number.
You can always visit the IRS website to learn more about Tax ID numbers to see what your local government is requiring from your side.
8. Build relationships with insurance carriers
Successfully starting your own insurance business is heavily influenced by the type of partnerships you build with insurance carriers. You can do so by following these steps:
- Researching top insurance companies: It’s always important to find insurance carriers that are in the same niche as you. Otherwise, insurance carriers in other niches aren’t always the best idea to work with.
- Apply for carrier appointments: Submit applications to become an authorized agent.
- Meet production requirements: Some carriers have training requirements or sales quotas.
- Negotiate commissions: Dive deeper to understand more about the commission structure for policies sold.
Above all, building strong relationships with multiple carriers makes it more possible to offer competitive policies.
9. Set up your office (either at home or at a physical office)
Regardless if you choose to work remotely or at an office, you need to set up your office. When setting up your office, it’s important to dive deeper into learning more about the following:
- Your office space: Lease or rent a location if you need one.
- Use Customer Relationship Management (CRM) software: This is important for managing client data and renewing policies efficiently.
- Phone and communication systems: Make sure you are effectively contacting clients and carriers.
Even if you set up your office in a remote setting, you need to make it look professional. There are plenty of insurers that are now working from home and even when clients want to pay them a visit, they even visit them at their own house!
Starting your own insurance business is a rewarding venture
Starting your own insurance business requires careful planning, industry knowledge, and commitment to providing excellent services. By following these eight steps, you are continuously learning and establishing a successful and sustainable insurance business.
The insurance industry relies on trust, reliability, and relationships. By remaining informed about industry trends, adapting to changing customer needs, and offering tailored solutions, you can easily set yourself apart from competitors. Keep in mind that success won’t happen overnight, but it all requires dedication, persistence, and a strategic approach.