How to Start a Car Insurance Company

By Tamon

Look around, can you notice the increasing number of insurance companies? Most of these insurance companies provide car insurance quotes. Have you ever wondered why? Do you know how to start a car insurance company?

There are many reasons that account for the rapid increase in the number of car insurance.

In most areas, you can’t own or drive a car without an automobile or car insurance and as driving continues to increase in popularity; the demand for best car insurance companies continues to rise as well.

The insurance sector and car insurance in particular, is one of the few sectors that are recession-proof. This sector is largely untroubled by the state of the economy. This is because insurance products (car insurance being one) are a necessary part of modern.  

Therefore, if you are looking to get in the business of making good money, and you can come up with the investment capital, then starting car insurance companies may be right for you.


How to Start a Car Insurance Company:  General Requirements

In order to be allowed to legally sell car insurance, you are required to meet certain requirements. While these requirements may vary from state to starts, there are a few that cut across all states. These comprised:

  • Age limit:  All states require the insurance agency to be at least 18 years
  • A clean criminal record and to obtain a written consent to engage in business activities, any misdemeanor or felony charges must be explained in a letter to the insurance commissioner.
  • All insurance agents or brokers must have a valid insurance license for the state where they are planning to operate or soliciting business and selling insurance products.
  • All states requires classroom instruction, passage of a state-administered exam and a clean criminal history as part of the license application process.


Personality Test

You should plan to start working as an insurance agent for a broker, and gradually grow to a broker to develop the personal skill needed to succeed in your own insurance business. If you have never been and agent, then you should carefully consider if you have the personality of the insurance business. Apart from product knowledge and licensing, being a successful independent insurance agent building the right personality for the job.

All businesses need that you are a good manager and leader. But the insurance business is about more than management, it’s about marketing. Even if you’ve been in marketing before, commission-only selling is different.

It’s one thing to be a person who enjoys talking to anyone and has a deep desire to help them understand new things and it’s quite another to be a commission-only salesperson.

To be personable at a dinner party or on a sales floor is not the same as sitting down face-to-face with complete strangers in their home, where they have all the control, and convincing them to trust you, your knowledge, and your advice.

You must not only be ready to do that, but you must also be able to do it almost immediately after finishing with someone who rejected you and all the while knowing that if you don’t make a sale, you don’t eat.

Thriving under that sort of pressure is one of the personality traits you will need to succeed. Also, you need to be disciplined. Do you have the discipline to make the hundreds of cold calls a week necessary to build a book of business and grow a reputation as a trustworthy and knowledgeable agent?

Finally, does the fire in your belly for success burn hot enough to endure these challenges day in and day out?

Whenever you have convinced yourself that you have the right personality, then, you can start thinking about getting licensed.


Getting License

In order to be allowed to start an insurance company, you must be licensed to allow you to legally sell car insurance in the state that you plan to operate your business and ensures that you have the necessary skills and knowledge to do so. While some states allow the transfer of your license, others do not.

Attend a pre-licensing course: All states require that you take between 20 and 40 hours of general insurance education courses and up to 12 hours of ethics courses before you can take the licensing exam. These courses are specific to the state in which you are hoping to acquire a license. This is because state laws vary from one to another. Many of these courses are available online and can be completed at your own pace, but do require course fees which runs from $300-$500 each. Most states require you to take separate licenses for health, life, and accident insurance, and property and casualty insurance.

Take a state-administered exam: Licensing exams are multi-part, which mean if you pass the property and casualty part, but fails, the life, accident, and health section, you can become licensed but may not sell auto or homeowners insurance. However, you may be require retake a failed section, at least one time without the need for a new application fee. This is required to obtain an insurance license in most states.

Make sure you know the requirements for your state. You may verify this from the state’s department of insurance. They will also notify you of the financial and other requirements related to licensing.

Some states may also allow you to transfer your license from one state to another.

If you would like to sell variable life insurance, you will also be required complete and pass the required coursework for a Series 6 license. This testing and licensing is administered by FINRA, a non-government regulatory body authorized by Congress to protect American investors.


Agency Licensing

This license allows you to incorporate your insurance business or bring in others insurance agents to work with you. In most states, if you choose to incorporate or hire insurance agents to work with, you may need to acquire an agency license. On the other hand, if you choose to operate as your insurance business as a sole proprietorship and do not hire insurance agents, your individual license is usually all you need.

While rules vary between states, in most states, no additional testing is required to obtain an agency license. However, you will be required to submit an agency licensing application and pay the associated fees for becoming a licensed agent. Agency licensing may not be required in cases where you’re only hiring support staff, such as telemarketers and office help.


How to Start a Car Insurance Company: Construct a Business Plan

Do your Research Study: To be able to put down the best car insurance plan, you will need to know how the insurance business operates, even without starting off. The best way to do this is to carry out self-study, speak to other insurance companies, know what they are facing, prospect the business in the area you plan to operate, the challenges and also what is needed for you to get on and running. You will need to know the startup cost. The startup amount or capital to get your own independent insurance business up and running usually ranges from $50,000 to several hundreds of thousands of dollars, depending on factors such as how you plan to operate your business and where you’re located. For example, starting your insurance company as a home-based business eliminates the need to pay rent, buy furnishings, pay signage and other expenses associated with a commercial location.

There are guaranteed expenses such as the cost associated with licensing, which can be quite substantial, with amounts in some states reaching several hundreds of thousands of dollars. You may also be able to fully license your auto insurance company for under $100,000. While there’s no benchmark amount that is required to start auto insurance companies, the business model, your location, experience, and business partnerships will all greatly affect this amount.  

Get in touch with the SBA (Small Business Administration) for any information regarding the required amount or capital you will incur in starting a business and for help in securing the funding to do so.


Your Insurance Business Plan: Similar to how you start any business, you will need a beautifully constructed business plan for your car insurance business.Your business plan should clearly outline your goals, how you'll attract customers (marketing strategy), which insurance carriers you'll work with (network), what your start-up costs are expected to be, and your projected income for the first few years of business.


Research what’s available independently. Familiarize yourself with all of the policies and plans you will have the capability to offer, as well as what it will take to offer them. Some of these plans will necessitate cooperation with other car insurance companies. You may also plan to provide online car insurance quotes to your clients to facilitate your acquisition process.

Remember that, your plan or schedule is your only guiding document which is able to guide you along your path to success. Hence, the plan should be consistent, effective and efficient.  

Decide the location of your business. You should be able to decide the state or states in which you operate your car insurance business and thus, get the required insurance license.

Decide or choose the actual city and location to position your office. This way, you will be able to determine whether you will be leasing, buying, or building an office.

Bear in mind that the specific objectives of your business plan are likely to change as you begin to build your business but your overall goals may not change.

An important feature of an insurance company is the ability to determine risk when insuring your clients. Thus, you will need proper the skills in this domain. Seek help from larger companies, especially those with whom you may be able to purchase information from or partner with. These larger car insurance companies or banks are likely to have the best access to this sort of information and the best technologies with which it is derived.


Be Prepared to Serve: The potentialsin this sector are higher. Thus, you will be required to serve as many customers as possible, especially if you sell more policies (which you should). The more the policy options will mean different clients and different rates, you can offer them. You can even sell policies offered by other larger insurance companies.

Make sure to offer comprehensive insurance, liability insurance, and collision insurance, as well as umbrella policies and multi-car insurance quotes.

Get advice on your business plan from public relations professionals, lawyers, accountants, and other business people as early as you’re able to do so.

Providing online car insurance quotes are one great way to meet the ever increasing online audiences.

Try to develop a strong relationships with contacts at other insurance companies, at all levels of the industry. These are potential avenues of information, thus, you may want to treat them as professional partners or friends.


Consider the option of purchasing an existing can insurance agency. This has the benefits of avoiding startup costs, saving time, and acquiring an existing customer base. There are always opportunities to partner or franchise with successful insurance companies as well.

Buying or purchasing an existing company is both easier and more reliable than starting your own business. This is usually because the business plan is already developed and has likely been tested. However, building your own brand from scratch will give you full control of your insurance company.

You can also consider adding other auto insurance companies to your business portfolio by partnering with an established insurance agency or buying a franchise.


How to Start a Car Insurance Company: Getting the Business Up and Running

Secure sufficient capital to get your business up and running. If you're planning to start and run your auto insurance company as a full-time job, you will most probably have to secure enough money to do so. You may likely need either investment capital from private investors or a loan to cover your start-up costs and living expenses until you start generating revenue.

While banks are increasingly reluctance to offer new business or startup loans, the SBA exists specifically to help entrepreneurs start and run small businesses.

Reach out to all personal contacts in the business world for finance. Private investors are usually great source of investment capital.

Have a carefully prepared business proposal ready if you plan to apply for financing. Such plans should contain details, including the total capital you need and other initial expenses for the first few years before your business start generating revenue. This will help potential financiers assess the risk involved in a potential investment or loan.


Business license and insurance: You will be required to register the business in the city in which you plan to operate your business and also, buy the necessary insurance policy to keep it running.

Thus, you have to apply for this license. Fill out all necessary applications form and pay the associated fees. Although, you may not be required to undergo any further testing or coursework, you will certainly be required to go through the paperwork and necessary payments. You will also need to acquire an agency license, if you intend to hire employees or hope to incorporate your business.


Finalize your business plan: At this level, you will need to put down the strategies you will need to put in place at the beginning to get your first repeat customers. Remember that, having a customer is important but having a repeat customer is the only sign that indicate your business is serving the right purpose by satisfying your customers’ needs. Thus, you need a long term business plan which will necessitate identifying customers and the specific marketing strategies that will appeal to them, identifying competitors, and hiring qualified employees.


Here are a few things you may have to put in place before you finally get your company up and running:

Make sure you’ve met all legal requirements and have protected your business and yourself.

Buy property and liability insurance for your car insurance company to cover or protect your assets in case of an accident, a natural disaster, and to protect from losses associated with lawsuits.

Choose the specific insurance policies you want to sell. While it’s possible to have known these policies before now, you may realize you have more of a potential to differentiate options than you had previously thought.

Get an easy mobile app and website in order to provide online car insurance quotes to your online audience.

Finally, make sure you’re equipped with all it takes to provide or meet as much customers with their insurance needs as possible. For example, consider selling insurance for special niches, like motorcycle insurance, vintage car insurance, and RV insurance.


Advertise your car insurance company:  The first success milestone should be getting as many people (if not all) as possible to know about your company especially in the area where you are operating. Of course, Advertising is a necessity because if people don’t know about your business, you are dome to fail. You will have to identify and contact potential clients. The keys to a good marketing strategy are to identifying your target market, know what makes your products unique, and developing a strategy to efficiently and effectively communicate the reasons to purchase insurance from your company.

You should target places such as driving schools, local publications, the DMV, and also provide online car insurance quotes to your customers.

Talk about your business to friends, business associates, family members and everyday acquaintances to notify them of your new business.

Emphasize, in all marketing materials and conversations, the opportunities for potential customers to save money by switching to one or two insurance policies offered by your company.


How to Start a Car Insurance Company: Different Types of Auto Insurance

While you plan to start your car insurance companies, you should be able to identify the various types of car insurance to consider:



The liability car insurance is considered the most important element of car insurance because it protects owners from the legal and financial repercussions of an accident affecting another vehicle, driver, or property.

Owners of this insurance policy (liability car insurance) type, benefits from claims, if they find themselves responsible for damages to others not to themself or their own vehicle in an accident.

However, most states require a minimum level of liability insurance. Having just this minimum level of insurance coverage implies that you are leaving yourself open to and attracting significant amount of risk if damages from the accident exceed your coverage levels.

On the other hand, purchasing too much car insurance quotes means you might be spending your income in paying excessive premiums for coverage you don’t need.


Collision Coverage

This is the form of car insurance policy that will pay for damages to its owners own vehicle in an accident. Whether you owe any money on your car, you will most likely be required by the bank to buy collision insurance.

Thus, you should be able to choose the right deductible collision coverage.

“Deductible in this case means the fraction of any damages that you are required to pay yourself before your policy steps in”

  • Having to pay a higher deductible will means paying less each year in premiums since you are taking away part of the risk from the insurance company.
  • If on the other hand you choose a lower deductible that will mean you will have to pay more for your policy since the insurance company is assuming more risk.

If your car is older, you will need to rethink whether collision insurance is the wisest option.

Some experts and financial planners suggest that car owners should decline collision coverage if their premium comes out to less than 10% of what you will receive when your car is damaged.


Comprehensive Coverage

This type of car insurance coverage is an extension of collision insurance policy that covers owner’s vehicle when it is on the receiving end of damages from fire, weather or theft.

When for example your windshield is struck by a rock over the course of your travels, your comprehensive insurance coverage will pay to repair the crack.

As with collision car insurance coverage, most banks require comprehensive insurance coverage if you are leasing or financing your vehicle.


Underinsured or Uninsured Motorist Insurance Coverage

This motorist insurance policy will protect you if you get involved in an accident with a driver who is either uninsured or underinsured.

There are more uninsured or underinsured drivers now than ever partly due to the current downturn in the economy.

Many areas or cities are more prone to the problem or accident than others. Make sure you carefully evaluate your situation as well as the situation of people around you before deciding how much of this insurance to purchase.

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