Start an Insurance Company

Summary: What are the licenses needed to start an insurance company? How much do they usually cost? What qualifications does one need to start a business selling insurances? What other ways can one own an insurance company aside from starting it from scratch? These questions will be answered by our basic guide.

Do you think selling insurance is a good business? Are you wondering what you need and what it takes to set up your own insurance company?

Insurance Company Licenses Requirement

You need a license to be an insurance agent. You can secure that by passing several state examinations. But since running an insurance company is a complicated business, you must have considerable experience working in the insurance business before considering you are better off working for your own company rather than under someone else’s as an agent or broker.

Aside from a license as an agent, the company must secure an insurance license itself in order to operate. Every jurisdiction has a minimum liquid asset requirement for an applicant to qualify for an insurance license. The amount is usually in the million-dollar mark. Insurance companies usually operate in more than one state. As such, you need to decide which states to operate and to secure a license for each state. The more populated a state is, the higher the cost of securing a license for that state. A license costs more than $100,000 on average.

You will also need a corporate license. Aside from an insurance license, your company will also need a license as a business entity and be registered in your city or incorporated with a state. Work with an attorney in order to establish the legal presence of your insurance company. Seek their advice regarding permits and requirements for starting a business.

Insurance Company Funding Needs

Because of licenses and minimum liquid asset requirements, an insurance business requires large funding to start. These are on top of what you have to spend for other startup costs, like the rent of your office, the purchase of furniture and computers, and the cost of creating a Web site to establish an online presence. Some sells stocks to get investors for the business.

Because of the need for a considerable capital to start an insurance company, and because of the licenses requirements, among others, opening an insurance company requires a lot of paperwork and considerable time. If setting up your own insurance company sounds too much work, you can also purchase a shell insurance company. Purchasing one will spare you with the hassles of securing licenses, although the number of licenses a shell company have will still factor on the total price of the purchase. Still, another way of starting an insurance business is by buying a franchise, which, however, could cost more.