Starting a life insurance company can be very rewarding if done correctly. There are many things to consider when starting a life insurance company, from the initial planning stages to the day-to-day operations. This guide will help you understand the basics of starting a life insurance company.
Here are the 10 steps you can take to get started on building your very own life insurance company.
10 Steps to Launching a New Life Insurance Company
1. Choose Your Type of Life Insurance Company
The first step in launching a life insurance company is to identify the type of life insurance business you want to launch. You might choose from the following types among others:
- A life insurance agency that represents many different carriers
- A life insurance broker that sells products from a few select carriers
- A life insurance company that offers its own products
2. Name Your Life Insurance Company
Give your life insurance company an identity so people will think of it as a well-known and respected brand. You can take the name of your life insurance company from your industry, focus on a geographical location, or use your own name among other options.
The main goal for naming your life insurance company is to make it sound appealing and trustworthy so that potential customers will be more likely to do business with you.
3. Determine Your Life Insurance Company Business Model
There are several possible types of business models for a life insurance company including:
Online Life Insurance: An online life insurance company sells its products completely online without the need for face-to-face interaction. This type of business is best suited for companies that have a strong internet presence and are able to reach their target market through online marketing and advertising efforts.
Direct Marketing Life Insurance: A direct marketing life insurance company sells its products through a direct sales group or team. This type of business is best suited for companies that have products that can be sold without the need for an insurance agent or broker.
Brokerage Life Insurance: A brokerage life insurance company sells its products through a network of independent insurance agents and brokers. This type of business is best suited for companies that have strong relationships with insurance agents and brokers.
No matter which model you choose, make sure that it aligns with your business goals and the products and services you offer.
Read more about choosing the right business model for your life insurance company.
4. Choose a Legal Form for Your Business
By incorporating your life insurance company, you will limit your liability. You can incorporate as a Limited Liability Company (LLC), a C Corporation (C-Corp), or an S Corporation (S-Corp). Or you can operate as a sole proprietorship.
The business structure you choose for your life insurance company will determine the amount of taxes you pay and which state or federal tax forms you need to file.
Read our article comparing the most common life insurance company business structures.
5. Write a Life Insurance Company Business Plan
All life insurance company business owners should develop a business plan.
A business plan is a document that outlines the goals, strategies, and operations of a business. It can be used to secure funding from investors or lenders, as well as to guide the day-to-day operations of the business. The business plan should include information on the company’s products or services, market analysis, financial projections, and management team among other things.
When developing your life insurance company business plan and strategy, you should think about the following questions your customers might have:
- What is the difference between life insurance and other types of insurance?
- Why do I need life insurance?
- How much life insurance do I need?
- What is the definition of a term policy?
- How does a term policy work?
- What are the benefits of owning a term policy?
- What is the difference between whole life and term life insurance?
- How does whole life insurance work?
- What are the benefits of owning whole life insurance?
- What is the difference between universal life and whole life insurance?
- How does universal life insurance work?
- What are the benefits of owning universal life insurance?
- What is the difference between indexed universal life and whole life insurance?
- How does indexed universal life insurance work?
- What are the benefits of owning indexed universal life insurance?
- How can I get the best life insurance rates?
- How often should I review my life insurance policy?
- What are the different types of life insurance riders?
- What is an accelerated death benefit rider?
- What is a waiver of premium rider?
- What is a long-term care rider?
Answering these types of questions will help you develop a business plan and strategy that meets the needs of your target customers.
Read our article about how to write a life insurance company business plan.
6. Apply for the Necessary Permits and Licenses
There may be required licenses and permits you need to obtain before launching your life insurance company.
The requirements for obtaining a life insurance license vary by state, but generally include taking an approved pre-licensing course, passing a state-administered examination, and completing a background check.
You must also register your life insurance company as a legal entity with the state where you plan to do business. You can simply file an online form through your Secretary of State website.
Registering with the federal government is also essential so you can properly pay taxes for your business. You will also need an Employer Identification Number (EIN), which you can apply for at the IRS website, if you plan to hire employees.
7. Determine Your Budget & Apply for Funding as Needed
In developing your life insurance company business plan, you will figure out how much funding you need to start and grow your business.
If you have your own funds to invest in your life insurance company, you may consider taking advantage of that. In addition to your personal funds, other forms of potential funding for your life insurance company include traditional bank loans, SBA loans, credit cards, angel investors and family and friends.
Read our article about the costs associated with starting a life insurance company to help you determine if funding is needed.
Read our article about how to fund your life insurance company.
8. Get the Technology & Software Needed to Run Your Business Efficiently
When you start your life insurance company, it’s essential to have the right technology in place to maximize efficiency. You definitely need a computer with Internet access, and accounting software for tracking expenses and revenues.
You may also want to invest in customer relationship management (CRM) software, which can help you manage customer data and track the progress of sales leads. There are many CRM software options available on the market, so be sure to do your research to find the one that’s best for your business.
9. Market Your Life Insurance Company to Potential Clients
Before you start selling your products and services, you have to let the world know you exist. The first step is to create a website so people can learn more about your products and services and how they benefit them.
After you launch your website, start promoting it through social media channels like Facebook, LinkedIn and Twitter. Also consider networking with other people in the life insurance industry through social media and blogs so they can help share your business.
You also need to start gathering the materials needed to execute on your promotions strategy, which is your strategy for attracting new customers. Life insurance businesses should consider the following promotional strategies for which you should start getting prepared:
- Sponsoring events and causes related to health and wellness
- Direct mail campaigns
- Advertising in publications read by your target market
- Online advertising, including search engine optimization
- Social media marketing, including paid promotions
- PR and public relations outreach to key media outlets
Read our article about how to market your life insurance company for more tips.
10. Get New Clients & Grow Your Business
When you promote your products and services, you’ll start to get interest from potential clients.
Make sure you’re ready to serve these clients. Also, be sure to establish systems to ensure consistency and reduce costs. And be sure to find and train the right people to help you grow your life insurance company.
Read our article about how to effectively grow your life insurance company to learn more.
Starting a Life Insurance Company FAQs
The life insurance industry is a $922 billion industry in the US, with a lot of room for growth. Starting a life insurance company gives you the opportunity to be your own boss, set your own hours, and make a good income.
To start a successful life insurance company, you need a sound business plan, the right licenses and permits, adequate funding, the right technology and software, and an effective marketing strategy.
To market your life insurance company online, you need to create a website and promote it through social media channels and online advertising. You should also consider networking with other people in the industry and writing articles or blog posts about the benefits of life insurance.
Here are some tips for starting a life insurance company:
- Research the market- Before you start your life insurance company, it's important to do your research and understand the industry. This will help you create a sound business plan and choose the right products and services to offer.
- Create a business plan- A business plan will help you map out business goals and objectives, as well as how you're going to achieve them.
- Get the right licenses and permits- In order to operate your life insurance company, you need to obtain the proper licenses and permits from your state.
- Adequately fund your business- You need to have enough money to cover the costs of launching and operating your business. This includes the cost of technology, marketing, and hiring staff.
- Choose the right technology- Technology is a crucial part of any life insurance company. You need to have the right software and systems in place to quote rates, process applications, and service clients.
- Develop an effective marketing strategy- In order to attract new customers, you need to have a well-thought-out marketing strategy. This should include online and offline marketing initiatives, as well as networking with other life insurance companies.
- Hire the right people- As your life insurance company grows, you'll need to hire staff to help with sales, customer service, and administration. It's important to hire people who are passionate about the life insurance industry and who have the skills and experience to help your business succeed.
A simple checklist to use when starting a life insurance company is as follows:
- Choose Your Type of Life Insurance Firm: This should be based on what you are best at and how much experience you have. Remember to keep your interests, skills, and experience in mind at all times.
- Name Your Life Insurance Company: This should be done with care, as your brand is important for attracting the right customers. A simple, memorable name will go a long way.
- Choose a Legal Form for Your Business: Whether you choose to become a sole proprietorship, partnership, LLC, corporation or another option will depend on your business. Ensure that you are aware of all the implications of each type.
- Determine Your Life Insurance Company Business Model: Determine how your business will make money. Will you sell products, services, or a combination of both?
- Write a Life Insurance Company Business Plan: Your business plan will also help you determine what your start-up costs will be and will provide a roadmap with which you can launch and grow.
- Apply for the Necessary Permits and Licenses: In most locations you will be required to apply for a business license and/or permits before you can begin operations.
- Determine Your Budget & Apply for Funding as Needed: You will need to know how much money you have to spend on all of your business-related expenses before opening any doors. If needed, apply for a small business loan or other funding options.
- Get the Technology & Software Needed to Run Your Business Efficiently: You need to have the right tools in place to succeed. Implement software that will help you manage your time, contacts, and business operations in general.
- Market Your Life Insurance Company to Potential Clients: A solid marketing plan will be crucial to your success. It should focus on attracting the right customers so that you can provide them with the products and services they truly need.
- Get Clients & Grow Your Business: Once you have a solid marketing plan, it's time to actively pursue and secure those who could benefit the most from your products and services.
Starting a life insurance company can be a rewarding and profitable business venture. By following these simple tips, you’ll be well on your way to opening and running a successful life insurance agency.