How to Start a Life Insurance Company in 14 Steps (In-Depth Guide)

Updated: March 29, 2024 is reader-supported. When you buy through links on my site, we may earn an affiliate commission. Learn more

The life insurance industry in the United States is massive, reaching $1.4 trillion in 2022. As the population continues to age and people become more aware of the importance of having life insurance, the market is projected to grow at a CAGR of 5% from 2023 to 2027.


Selling life insurance products can be an extremely lucrative endeavor. With various options like term life, whole life, and universal life insurance policies available, there are ample products you can sell to clients once you become a licensed life insurance agent.

This guide will walk you through how to start a life insurance company. Topics include market research, registering your EIN, applying for business insurance, forming a legal business entity, and more.

1. Conduct Life Insurance Market Research

Market research is important for newcomers to the insurance industry. It provides a clear view of market saturation, trends in products and services, and your target market.


Some information you’ll learn through market research into your own insurance company includes:

  • The market for term life insurance is positioned favorably for new agents.
  • With the average 30-year term life policy costing approximately $300 per year in premiums, an agent writing 100 term life policies a year could quickly reach six figures in personal income.
  • Term life only scratches the surface of the total addressable market.
  • Permanent life insurance, including whole and universal life, brings in over $100 billion in yearly premiums as well.
  • Policies not only pay out a death benefit-like term but also accrue cash value that remains with the policy.
  • Annuities also cannot be overlooked. As retirement vehicles that offer lifetime income options, annuity consideration rates have been climbing up.
  • Certain life insurance policies may include additional benefits, such as burial insurance.
  • With over $200 billion in sales last year, annuities present a segment growing in demand.
  • As more baby boomers retire, annuity demand is forecasted to expand rapidly.

Building a book of life insurance clients and selling the array of policy options available can generate substantial income rather quickly for new agents. With most households admitting their coverage remains inadequate, the market opportunity appears quite optimistic.

2. Analyze the Competition

When starting a life insurance business, spending time to analyze your competition is crucial to succeed in the modern, digital insurance landscape. While incumbent life insurance companies still rely heavily on brick-and-mortar agent networks, analyzing your online presence versus competitors has become vital.


Evaluating the websites of leading life insurance carriers reveals modern best practices. Sites like Haven Life make getting a real-time quote online simple and convenient. Pages focused on helping visitors understand basic concepts or policy options are organized. Optimizing online content for relevant buyer keywords ensures you appear high in search results as well.

Beyond a website focused on lead conversion, an active social media presence also drives brand visibility and trust now. Platforms like Facebook, Instagram, and LinkedIn enable modern life insurance businesses to directly engage with prospects.

Many businesses still rely predominantly on in-person meetings and referrals for new business. Being knowledgeable on competitor commission structures and product offerings is still important. Blending personalized service with an optimized online presence offers emerging agents the best competitive positioning entering the field.

Analyzing all distribution avenues leading life insurance businesses use to acquire customers provides key insights. Both digital and in-person channels bring value, requiring emerging companies to embrace an omnichannel market approach right from the start.

3. Costs to Start a Life Insurance Business

When starting a life insurance agency, there are a variety of upfront costs to consider before you begin selling policies and building your book of business. Proper budgeting at the onset will allow you to effectively scale and position the agency for growth.

Start-up Costs

  • Expect exam fees and prep course materials to run $300-$500 upfront. Many states also charge licensing fees of around $50 to $100 as well.
  • The Department of Insurance application process costs approximately $500 depending on your state. Some states may require a surety bond to protect clients, which can add another $250 to costs.
  • Expect to budget $2,000-$5,000 for basic office furnishings and decor if opting for leased retail space.
  • A new laptop/PC or iPad for presentations will likely run $1,000-$1,500. Customer relationship management (CRM) software subscriptions span $50-$100 per user monthly.
  • Email marketing tools like MailChimp offer free plans for up to 2,000 contacts.

In total, expect to reserve about $5,000-$10,000 to cover all start-up licensing, equipment, office, and software costs when launching the business.

Ongoing Costs

Ongoing costs to operate the agency arise as well, first and foremost being your own income needs. It takes time to build a book of business, so have at least 6 months of personal living expenses saved. The Health Insurance Marketplace offers affordable individual health plans if needed.

As the agency grows, expenses like payroll, rent, and marketing materialize. While remaining lean at first is wise, budgeting $2,500-$5,000 monthly for these recurring costs is reasonable once established. Outsourcing needs like appointment setting services and graphic design work arise too.

Gross annual commissions will land between $50k-$100k once you have 100+ active policy clients. However, approximately 30-50% of commissions received get paid back to your general agency. Plan on $30,000-$50,000 in net income that first year as you build relationships and your book.

Make sure to connect with general agencies to represent contracts and commission structures. Also, make appointments to discuss your start-up business plan with commercial bankers should extra capital be needed to cover costs as operations scale.

4. Form a Legal Business Entity

When establishing your life insurance agency, choosing the right business structure is key for liability protection and scaling capabilities. The four main entities each offer distinct pros and cons to evaluate.

Sole Proprietorship

Sole proprietorships simply involve operating under your identity without formal registration. This allows for quick setup and total control of operations. However, it exposes your assets to any agency liabilities or lawsuits.


Partnerships enable you to combine resources with one or more business partners, while still avoiding double corporate taxation. However, similar to sole proprietorships, each partner’s assets remain vulnerable without limitations, making partnerships traditionally better suited for smaller startups.

Limited Liability Company (LLC)

Establishing a limited liability company (LLC) combines pass-through taxation with liability protections by separating your personal and company assets. This is achieved by filing formal articles of organization that outline the LLC’s structure. Owners are shielded from certain liabilities and lawsuits.


Corporations also limit financial liability by registering as a separate legal entity. Shareholders who own stock in the corporation have limited exposure related to business debts and obligations. However, the corporate structure is more complex regarding ownership/stock distribution, record keeping, and taxes.

5. Register Your Business For Taxes

Forming a legal business entity like an LLC requires obtaining an Employer Identification Number (EIN) for tax purposes. An EIN functions as the business’s social security number for proper IRS identification when opening bank accounts, applying for licenses, filing taxes, and more.

The EIN application through the IRS is conveniently free and fast online. Simply provide basic details about your LLC structure such as name, address, and ownership percentages. Take care to accurately enter all official entity names and data to match your formation documents.

Once submitted, the EIN will be provided immediately on the IRS website upon approval. Make sure to print and save this for your records. It will be used universally when legally registering your business across banking, tax, regulatory, and other commercial functions necessary to operate.

If selling taxable goods or services, register for state sales tax compliance as well. The Streamlined Sales Tax System conveniently facilitates multi-state registration for life insurance agencies operating across borders. Required monthly or quarterly reporting and remittance deadlines vary by state depending on revenue. Most states impose minor registration fees around $20.

While establishing your EIN and sales tax permissions, also invest time in understanding the tax implications your chosen business structure carries. Consult both a business accountant and attorney regularly to ensure full legal and tax code compliance every year. Proper income/expense categorization and deductions will save substantially on tax bills.

6. Setup Your Accounting

As a life insurance agent, keeping clean books and clear records is imperative for smoothly operating your practice. Investing in quality accounting tools and professional support provides valuable structure when first launching the business.

Accounting Software

Implementing small business accounting software is strongly advised to efficiently categorize every transaction from the start. Platforms like QuickBooks seamlessly integrate with bank/credit card accounts to automatically import and code expenses. Time otherwise spent manually tracking invoices and collecting receipts gets freed up to focus on revenue-driving activities.

Hire an Accountant

Supplementing with an expert accountant adds further oversight for both bookkeeping and taxes. Expect fees between $200-$500 monthly for basic reconciliation and financial statement preparation. Additionally, budget $500-$1,500 for comprehensive year-end tax planning/filing if only using a CPA at fiscal close.

Open a Business Bank Account

Maintaining completely separate finances for your personal and business dealings simplifies this accounting as well. Keep expenses, income, assets, and debts for the agency fully isolated in designated bank accounts/cards. Never co-mingle personal and business transactions.

Apply for a Business Credit Card

Applying for a small business credit card also smooths cash flows between higher upfront customer acquisition costs and delayed commission payments in the insurance sales cycle. Lenders determine approval and credit limits based on both personal and business credit scores, requiring a 680 and up personal score initially before business history alone becomes qualifying.

7. Obtain Licenses and Permits

Before transacting any policies or working with clients, aspiring life insurance agents must first complete all federal and state licensing requirements. Find federal license information through the U.S. Small Business Administration. The SBA also offers a local search tool for state and city requirements.

On the federal level, becoming appointed with life insurance carriers involves extensive vetting, education, and paperwork. Carriers assess agent candidates’ competencies across ethical conduct, financial diligence, and product knowledge standards.

Expect to complete both forms and content covering suitability, fraud prevention, and continuing education directives as examples. Appointment timeframes span 6-10 weeks pending background check and approval wait times.

Agents must then pass state licensing exams per the jurisdictions they operate. Resident state licensure requires passing a comprehensive exam. Most exam fees hover around $100 and test scoring is available immediately. Some states also mandate fingerprints for further criminal reporting system checks as well.

Non-resident licenses then provide reciprocity for agents to solicit sales across other jurisdictions. Over 40 states currently participate in some form of reciprocal licensing agreements available through the NAIC. Completing a state’s non-resident application involves paying its set license fee, which varies by location starting as low as $20 per non-resident state.

8. Get Business Insurance

It’s funny to think of an insurance company needing insurance, but you will. Commercial property insurance, professional liability insurance, and even general liability insurance are all products you can use to protect your business.

For example, not carrying errors & omissions (E&O) coverage leaves the agency legally exposed if a client alleges negligent advice or improper policy handling resulted in damages. Finding an E&O plan like those from CoverWallet protects against such liability claims.

Additionally, lacking data breach insurance could bankrupt smaller agencies if cybercriminals compromise private customer information. The legal, forensics, and recovery costs surrounding breaches easily escalate to hundreds of thousands absent proper coverage.

Failing to insure physical assets likewise drains resources if offices face incidents like fires, storms, or theft. Standard commercial property coverage replaces damaged furnishings, equipment, and other agency-owned building structures in these situations.

To secure coverage, begin discussing risks and ideal coverage limits with reputable independent insurance agents in your state. They quote plans from trusted providers to extend tailored protection specific to agency needs and exposures.

9. Create an Office Space

Establishing a professional office presence elevates credibility when first meeting life insurance clients. While initially working from home has appeal for lower costs, consider these options to match company growth.

Retail Office

Retail office settings facilitate walk-in traffic should the location allow. Storefront visibility enables neighborhood customer acquisition and convenient in-person consultations. However, overheads like rent, parking allotments, renovations, etc. make stand-alone offices expensive propositions for earlier-stage agencies.

Coworking Office

Coworking spaces like WeWork offer more flexible terms for solopreneurs and small teams. Open layouts promote collaborating with other professionals across fields while also renting private meeting rooms. Expect membership fees between $300-$800 monthly based on facility/location amenities to enable scaling office needs up or down.

Commercial Office

Commercial spaces present long-term office goals as agencies expand. Multi-year leases secure durable addresses for the business alongside larger capacity for employees and clients. Class A spaces in major metros approach $50 per square foot in yearly rent, however, excluding build-out and related costs.

10. Source Your Equipment

Launching a life insurance agency primarily involves purchasing technology tools and office furnishings. While budgets are constrained at the start, focusing spending on essential productivity items smooths early growth.

Buy New

When buying new, national chains like Staples and Office Depot offer competitive prices across all equipment categories needed. Shop end-of-season sales on furniture, business machines, tech gadgets, and supply stocks for additional discounts. Financing options exist too for larger spends over $500.

Buy Used

Buying quality secondhand equipment from local sellers helps conserve precious capital too. Facebook Marketplace commonly advertises office furniture such as desks and file cabinets resold after upgrades or closures. Craigslist and Nextdoor also list local offerings for used laptops, printers, phones, and miscellaneous office wares at reasonable costs.


Rental agreements provide another affordable avenue if needing more flexibility. Furniture rental businesses often offer monthly office furniture rentals with flexible terms for scaling needs. Expect around $75 monthly for desks and $35 for chairs. Desktop computers also rent affordably from chains like Rent-A-Center if securing company machines initially seems difficult.


Leasing agreements make sense for high-end equipment with useful lives over 2 years. Copier/scanner/fax combination units essentially enable modern paperless insurance agencies but run $5,000 new. Options exist to lease these over 3-5 years instead to preserve capital, then upgrade later as needed.

11. Establish Your Brand Assets

Crafting a distinctive brand identity enables fledgling life insurance agencies to project professionalism and quality right from launch. Investing in core brand assets grants credibility when prospecting clients early on.


Get a Business Phone Number

Securing a unique business phone line first facilitates listing core contact details across other branding elements consistently. Services like RingCentral provide vanity numbers, call routing, voicemail transcriptions, and messaging integrations to streamline communications.

Design a Logo

Designing a sleek, memorable logo also helps amplify recognition and trustworthiness through visual marketing materials. Clean icon logos quickly convey brand qualities through thoughtful imagery and minimal text. User-friendly sites like Looka guide entrepreneurs through logo prototyping, feedback, and final vector file access seamlessly.

Print Business Cards

Printing professional business cards featuring the phone number and new logo enables conveniently promoting the agency in person. Agents rely heavily on referrals, making cards invaluable for networking, events, client meetings, and more. Vistaprint empowers easily ordering custom, affordable card stocks branded for any agency.

Buy a Domain Name

Purchasing a domain name equally positions agencies digitally as well, especially when the name captures branding elements from business cards. Domain registrars like Namecheap make buying and configuring a new site address inexpensive at under $20 annually.

Design a Website

Building out a modern website on that domain next allows detailing capabilities and policies online conveniently 24/7 through site builders like Wix. Pre-designed templates, drag-and-drop layouts, integrated chatbots, and lead forms simplify launch. Freelance web developers found on Fiverr offer to build more complex, custom-coded sites too if desired down the road.

12. Join Associations and Groups

Joining key local business alliances and trade groups expands critical connections for aspiring life insurance agents. Surrounding yourself with fellow financial professionals facilitates more referrals, best practices, and insider techniques essential early on.

Local Associations

In most metro areas, associations like the National Society of Financial Service Professionals offer continuing education, compliance insights, career development, and frequent mixers to foster regional peer bonds. Expect yearly member fees under $500. Cities also host chapters focused explicitly on mentorship for insurance newcomers as well.

Local Meetups

Sites like Meetup conveniently aggregate regular local meetup events too. These recurring in-person opportunities to interface with fellow agents breed both new business relationships and potential client introductions. Most gatherings have modest entry fees of around $10-25 per meeting.

Facebook Groups

Facebook furnishes another avenue to discover advice and partners through niche interest groups easily. For example, Life Insurance Agents share hundreds of discussions around licensing, appointments, objections, marketing wins, etc. These free forums make gleaning actionable techniques convenient.

13. How to Market a Life Insurance Business

Implementing marketing initiatives fuels discovering and converting highly qualified life insurance prospects consistently. While leveraging referrals from current policyholders offers the best customer experiences, focusing time across digital and traditional channels drives the visibility necessary to attract new leads at scale.

Referral Marketing

Satisfied term-life customers appreciative of personalized service often eagerly refer family and friends seeking coverage. Offering existing clients a $10 coffee shop gift card for every introduction they make that turns into a sold policy costs little but incents more warm referrals.

Digital Marketing

On the digital front, running Google/Facebook PPC ads targeted locally by income level and family status puts relevant protection offerings in front of targeted buyers actively online. Creating a YouTube channel focused on common questions around coverage also improves visibility answering common concerns transparently to build trust. Blogging regularly about risks families face builds your expertise profile as well for search traffic.

Traditional Marketing

More traditional advertising also maintains roles, especially for older demographics still digesting physical materials about insurance options. Traditional advertising includes:

  • Sending postcards
  • Printing flyers
  • Posting mailers to higher-income neighborhoods
  • Local radio ads during drive times
  • Other direct mail and print incentives like coupons

While all mediums have episodic individual costs, combining touchpoints secures exposure to client personality types across channels. This allows for nurturing diverse lead sources effectively through customized consultations tailored to initial inquiry origins.

14. Focus on the Customer

Providing exceptional customer service must remain the cornerstone of any life insurance agency, even amidst scaling operational complexity long-term. How agents educate, inform, and support policyholders directly correlates to referral rates and retention driving profitability.

Confused beneficiaries often require extensive assistance properly filing claims after loved ones pass away. Handling payouts transparently and swiftly during these emotional times earns immense goodwill. This motivates glowing recommendations to other prospects hearing those experiences.

Neglecting client inquiries on policy changes or renewals risks those accounts lapsing. Disengaged policyholders then relay poor service stories as cautionary tales, dissuading further business. Even just five lost customers annually from bad experiences sacrifice huge income down the road.

Agencies delivering consistent, caring support cement loyal followings. Satisfied term life subscribers frequently return seeking additional permanent life or annuity products as needs evolve. And clients acquired organically via word-of-mouth advertise your brand directly to similar demographics.

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