Who Needs an Insurance Agent License?
Throughout the country, anyone who wants to become an insurance agent must go through the process of obtaining a license in all of the states where they plan to do business. The first thing you�ll need to do is decide what type(s) of insurance (also known as �lines of authority�) you will specialize in. These include life, health, property and casualty, and more.
Next, you�ll need to decide whether you want to operate as an insurance agent or as an insurance broker. Insurance agents represent insurers, which can sometimes be more than one specific insurance company. Brokers represent individuals and companies that want to buy insurance and will find them the best policy available in the insurance marketplace.
What Are the Licensing Requirements?
Licensing requirements differ by state, and in most states, they also differ by line of authority. To find out the requirements you�ll need to meet, check with the state agency that regulates the insurance industry in each state in which you are seeking a license.
In general, you�ll need to:
- Be at least 18 years old
- Complete a certain number of hours of pre-licensing education for your chosen line(s) of authority
- Pass the applicable state licensing exam(s)
- Undergo a background check
In the majority of states plus Washington, D.C., insurance agencies and insurance brokers must purchase a surety bond as a condition of doing business within the state. In some states, a single bond can cover everyone working in an agency, but in others, a separate bond is required for each individual agent or �producer.�
Why is a Surety Bond Required?
The primary purpose of an insurance agent�s surety bond is to guarantee that insurance agents operate in accordance with all applicable state insurance laws and regulations. The bond also protects the state and the public against financial losses incurred as a result of an insurance agent�s unlawful or unethical business conduct. It ensures that funds will be available to pay damages to the injured party.
How Does It Work?
The surety bond agreement is a legally binding document that brings together three parties: the obligee, the principal, and the surety. The obligee is the state�s insurance regulatory body, the principal is the insurance agent or broker who is required to purchase the bond, and the surety is the company that underwrites and issues the bond.
The obligee sets the required bond amount�also called the bond�s penal amount�which is the maximum that will be paid out on a claim. If the principal violates the terms of the bond agreement, the injured party can file a claim against the bond.
The principal is legally obligated to pay all valid claims, but in many cases, the surety will pay a claim initially and then collect reimbursement from the principal.
How Surety Bonds Work for Insurance Agents in Licensing
The annual premium for any surety bond is a small percentage of the bond�s penal amount. The surety sets the premium rate for each bond applicant. If the bond is for an agency or insurance brokerage company, it is issued in the name of the owner(s). The primary factors the surety takes into account are the personal credit score and financial stability of the owner(s).
Bond applicants who have good credit and are financially stable typically are assigned a premium rate in the range of 1% to 5%. Those with lesser credit and finances should still be able to get bonded, but will pay a higher premium rate.
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Request an online quote or give us a call today to discuss your bonding needs so you can meet these insurance agent license requirements.