Most small business owners — including insurance agencies — choose to form a limited liability company (LLC), for growing your insurance business while protecting your personal assets.
The process of obtaining an insurance license for an LLC may vary depending on the state where the LLC is located and the type of insurance being offered.
In this article, we walk you through the steps on how to get an insurance license for an LLC, including where to apply for your business insurance license and the licensing fees for each state.
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Prerequisites to Getting an Insurance License for an LLC
To obtain an insurance license for an LLC, there are certain prerequisites that must be met. These prerequisites may vary by state and may depend on the type of insurance being offered.
Become a Licensed Insurance Agent
First, you must get an insurance license in the state that you are conducting business in. If you are looking to open your insurance company, then becoming an agent is the first step required to officially conduct business and sell insurance policies.
Typically, the eligibility requirements for an insurance license include being at least 18 years old and a US resident.
The common steps required to get an individual insurance license include:
- Complete a pre-licensing education course: Most states require individuals to complete a certain number of hours of pre-licensing education before they can take the licensing exam. You can find approved courses through your state’s Insurance Department website.
- Pass the licensing exam: Once you have completed the pre-licensing education course, you will need to pass the licensing exam. The insurance licensing exam will test your knowledge of the insurance industry and state-specific insurance laws.
- Get a fingerprint-based background check: Many states require insurance license applicants to undergo a criminal background check by submitting your fingerprints to the to a third-party agency or local law enforcement.
- Apply for the license: After passing the licensing exam and doing the background check, you can apply for your insurance license through your state’s Insurance Department website.
- Maintain your license: Once you have obtained your insurance license, you will need to renew it by completing continuing education (CE) requirements and renewing it periodically according to your state’s requirements.
Check out our how to become an insurance agent guide, which outlines the specific steps required to obtain an insurance license — from passing the insurance exam to license application, and more.
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Form Your LLC
Once you have submitted your business license application, it’s time to choose a legal structure for your business. If you’re a single insurance agent or have a few agents working together, it’s a good idea to choose an LLC as your business structure. The key reason you’d consider forming an LLC as an independent insurance agent is to protect you from personal liability.
The cost of an LLC depends on which state you form your LLC in. The primary cost of forming an LLC for your insurance company is the state filing fee. This fee ranges from $40 to $500 depending on your state.
After choosing your business structure, you’ll need to register your LLC with the state, usually with the Secretary of State’s office. The steps to forming an LLC will vary from state to state.
The prerequisites to forming an LLC can vary slightly depending on the state in which the LLC is being formed. However, here are some common prerequisites that you should consider:
- Choose a unique name: The LLC’s name must be unique and not already in use by another business. You can conduct an LLC name search and check with the Secretary of State’s office in your state to see if your chosen name is available.
- Choose a registered agent: An LLC must have a registered agent who can receive legal and tax documents on behalf of the LLC. The registered agent must be located in the state where the LLC is being formed.
- File articles of organization: Articles of organization are legal documents that must be filed with the Secretary of State’s office to officially form the LLC. These documents typically include information such as the LLC’s name, registered agent, business purpose, and management structure.
- Obtain necessary licenses and permits: Depending on the nature of your business, you may need to obtain licenses and permits from federal, state, or local authorities. Examples may include business permits to operate in a specific industry or location, and tax identification numbers.
- Create an operating agreement: Although not always required by law, it’s generally a good idea to create an operating agreement that outlines how the LLC will be run, how profits and losses will be distributed, and how decisions will be made.
- Pay the filing fees: The cost to form an LLC may vary by state and can range from a few hundred dollars to more than a thousand dollars.
Steps to Get an Insurance License for an LLC
Once you’ve obtained your personal insurance license and completed the LLC formation steps, you can go ahead and apply for an insurance business entity license. Getting an insurance license for your insurance company consists of five common steps. Just follow these steps to help simplify and expedite your licensing process.
Step 1: Name Your Designated Responsible Licensed Producer
After you become a licensed insurance agent and ready to start an insurance company, you must determine who will be your designated responsible licensed producer (DLRP).
According to the Securities and Insurance Licensing Association, all states require business entities — in this case an “insurance company” — to designate a responsible licensed producer or responsible person to act as the authority of an insurance company. A DRLP is also called an “endorsee” in some states.
Most states (like Minnesota, New York, and Utah) require insurance companies to submit a record of their DRLP. Your business should keep your DRLP’s basic information up-to-date with the state. The DRLP is the first point of contact if a state conducts an insurance agency audit.
Many insurance companies name their primary owners of the business as DRLPs. If you operate as an insurance agent or producer, you can be a DRLP.
The Producer Licensing Model Act (PLMA) defines six major lines of authority (LOAs) for insurance:
- Accident and Health or Sickness
- Variable Life and Variable Annuity Products
- Personal Lines
If your business works across multiple LOAs, you may have to have multiple DRLPs responsible for compliance in these areas.
Step 2: Secure an Appointment
After determining your DRLP for each line of authority, some states require that you must secure appointments. An appointment is a contract with an insurer or insurance company allowing you to sell their products as an agent.
You must also secure contracts with insurance carriers (such as Nationwide, Liberty Mutual, AAA, Progressive, etc.). Insurance carriers allow your company to sell their services and will pay you a commission on each policy.
Step 3: Submit a Financial Security Requirement
In most states, LLCs must submit an Errors and Omissions (E&O) policy (also called professional liability insurance) or a surety bond.
An E&O policy is designed to protect insurance businesses against claims that they have made errors or omissions in their professional services, such as providing incorrect advice or failing to provide proper coverage.
A surety bond is a three-person (principal, obligee, and surety company) type of contract that provides financial protection to clients of the insurance business in the event that the business fails to fulfill its contractual obligations. For example, if an insurance business agrees to provide coverage for a client but fails to do so, the client can make a claim against the surety bond to recover their losses.
LLC insurance companies must provide proof of the E&O policy or a surety bond and name the LLC as the named insured and/or as an amendment or endorsement to that policy on their license application. Usually, insurance businesses are more likely to need an E&O policy than a surety bond due to the high risk of professional liability claims in the insurance industry.
Check your state’s Insurance Department’s website to find out which type of financial security requirement you need for your LLC.
Step 4: Complete an Insurance License Application
All states will require you to use NIPR, Sircon or NAIC systems to submit your business entity license application to the State Department of Insurance. DRLPs should be named on the business entity application.
Find out the business insurance licensing fees in your state below.
|State||State Application||Business Entities Fees|
|Hawaii||SERFF Filing Access||$10|
|Indiana||Sircon or NIPR||$40|
Step 5: Application Review
The application review process for an insurance business license may vary depending on your state, but generally involves a thorough review of your licensing qualifications, proof of financial security, and compliance with business laws and regulations.
You must carefully prepare and provide all required documentation and information to avoid delays in processing your application.
Once your application has been reviewed and approved, the state Insurance Department or similar licensing authority will issue an insurance license for your LLC. It’s important to renew your license to keep it active and state-compliant to ensure that you can continue to legally operate your business.
What Happens After Getting an LLC Insurance License?
After you get an insurance license for your LLC, there are things you need to do in order to keep your insurance company in good standing with the state.
Renew Your License
Each state will require your license to be renewed every one to two years or more. Business entity licenses are subject to payment of a license renewal fee.
Most states also require insurance agents to take CE courses to maintain their licenses. In addition to the CE courses, as a business owner, you should aim to stay current with the latest industry trends and hone your insurance business skills.
LLC Insurance License FAQ
What are the requirements to start an insurance company?
Can an LLC seeking to be issued an insurance license include a member who is not licensed as an insurance agent?
As an LLC seeking to be issued an insurance license, it’s possible that the state may require at least one member to be licensed as an insurance agent in order for the LLC to be eligible for the license. Some states may allow for an LLC to have a non-licensed member as long as the licensed member is designated as the responsible party for the LLC’s insurance activities.
Can a non-licensed member of the LLC collect a fee from the insurance company for referring clients to the company?
No. A non-licensed member of an LLC cannot collect a fee or commission for selling or referring insurance policies in exchange for compensation. This is because state insurance regulations require individuals who are involved in selling, soliciting, or negotiating insurance policies to be licensed as insurance agents.