Insurance brokers play an important part in helping consumers select insurance coverage. It is an in demand career and one that anyone can pursue. That said, there are some steps you will have to take if you want to become an insurance broker as many states have enacted laws to regulate insurance and other financial professionals.
In this guide, we will break down a step by step process for how to become a mortgage broker.
Step 1. Learn your state’s requirements
The first step to becoming an insurance broker is to find out what requirements your state has set for brokers. Each state has specific steps that brokers must follow.
Some will require you to get a broker license while others will not. And then there are states like California that require brokers to receive a separate insurance license for each type of insurance they work in whether it be auto, life, property, or health insurance.
You can learn more about your state requirements by visiting the National Insurance Producer Registry (NPR) website.
Step 2. Gain knowledge and experience
While there is no formal education requirement for becoming an insurance broker, the U.S. Bureau of Labor Statistics (BLS) has found that companies prefer to hire brokers with a bachelor’s degree, particularly those in finance or economics.
Whether or not you choose to get a degree, you will want to build the knowledge and skills needed to be a successful broker. An effective way to do so is to pursue a certification. This will require you to be well-versed in insurance broking and will help you stay on top of any industry trends.
Two certification programs worth pursuing are the Certified Professional Insurance Agent Designation (CPIA) and the Certified Insurance Counselor (CIC) programs.
Another way to maximize your effectiveness as a broker is to choose a specialty. With a specialty, you can become a master of a particular type of insurance. Some of the fields you could specialize in include:
Step 3: Complete any pre-licensing requirements
Next, you will want to complete any pre-licensing requirements set by your state. These will vary based on location.
A common requirement is to complete a pre-licensure education course. These training programs teach state insurance laws, and how to conduct business ethically.
For example in California, you need to complete 12 hours of education in California insurance codes and ethics plus 20 hours of specialized education for your insurance field.
Course requirements are usually accompanied by an exam which is used to verify that you understand the concepts. Exams normally take place at in-person testing sites and can be scheduled online. The exact format for the test can vary but most follow a multiple choice format.
There is usually a small fee to take the licensing exam. Because you complete the exam using a computer, you will know immediately whether you passed or failed.
Step 4: Get an insurance broker bond
Most states require insurance brokers to get a surety bond before they are allowed to legally operate. These bonds are a contractual agreement between three parties; the insurance broker (principal), the state agency (the obligee), and the surety company (or bonding company).
They are put in place to ensure that brokers adhere to all licensing requirements. The bonds also provide financial protection to the broker’s customers and the state. If the broker causes damage to another party, that party can file a claim against the bond. In the event of a successful claim, the surety company will pay out damages up to the total bond amount.
The required bond amount for insurance broker bonds varies from state to state. Below are the required amounts for a few of the most popular bonds for insurance brokers.
- California Insurance Broker Bond: $10,000
- District of Columbia Insurance Broker Bond: $20,000
- Georgia Insurance Broker Bond: $2,500
- Louisiana Insurance Broker Bond: $25,000
- Massachusetts Insurance Broker Bond: $2,000
- Utah Insurance Broker Bond: $5,000
No matter how large a bond your state requires, you will only need to pay a portion as a premium to get the bond. This is typically between .5% – 1% of the total bond amount. In most states, insurance broker bonds usually do not require a credit check.
Step 5: Submit insurance broker license application
Once you have met all your state’s requirements, you can submit your application for an insurance broker license. Depending on your location, this can be done online or through mail.
When submitting your application you will need to provide proof that you’ve completed the knowledge exam and any other requirements. You may also need to provide fingerprints and other supporting documents as requested.
How to become an insurance broker frequently asked questions
Do you have to renew an insurance broker license?
In most states, insurance broker licenses are only valid for a set amount of time meaning you will eventually need to renew your license. The renewal process can vary, but it tends to involve completing continuing education courses and potentially paying a renewal fee.
You’ll want to check your state’s requirements upon receiving your license to ensure that you do not miss the expiration date.
What is the difference between an insurance agent and an insurance broker?
Insurance agents and insurance brokers both play an important part in the insurance industry by helping consumers get insurance coverage. The main difference is who the insurance professional works for.
Insurance agents work with insurance companies and are paid a commission for any policies they enroll.
Insurance brokers work on behalf of the consumers. They will help broker insurance policies through third-party intermediates or insurance companies who then pay the broker for their work.
Can anyone be an insurance broker?
Anyone can become an insurance broker provided they meet the licensing requirements established by the state. Beyond being over 18 years old and passing a background check, you typically only need to complete the state’s pre-licensing training and exam.
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