How Much Does it Cost to Become an Insurance Agent?
The Medicare industry is booming. With over 10,000 individuals turning 65 each day, and with that number expected to double in the next several decades it’s safe to say the Medicare sales industry is here for the long haul. A career in insurance sales can be both lucrative and rewarding as you are connecting individuals with an essential need and building relationships along the way. So now that we’ve sold you on a career in insurance sales, you’re probably wondering how much does it cost to become an insurance agent? Keep reading to find out the steps and costs associated with becoming an insurance agent.
Steps and Costs to becoming an Independent Insurance Agent for Medicare
1. Get Health Insurance License
Getting a health insurance license is the first step to becoming an independent health insurance agent. Depending on the state you apply in, you may be required to complete an insurance education course. Courses can vary in price and content. Even if your state doesn’t require an education course most individuals still choose to take a course to prepare for the exam.
Once you have completed a course or prepared for the exam, you will need to take and pass the insurance license exam. Prices for the exam vary by state but typically run between $40-$150. Once the test is completed the next step is to apply for your insurance license. Each state has its own license application process. Generally, there is an application fee ranging from $30-$200 and a background check that could run around $30.
It is also important to note that some insurance carriers require agents to have a life insurance license as well. Regardless of the requirement, many agents choose to get both licenses at the same time so they are able to provide their clients with other insurance products later down the road.
Example of Estimated Cost for Health & Life Insurance License in California:
Education Course: $80.00
Background & Fingerprints: $59
Health Application Fee: $188
Health Licensing Exam: $55.00
Life Application Fee: $188
Life Licensing Exam: $55.00
Total Estimated Cost: $625
2. Pass AHIP & Individual Carrier Certifications
Once you’ve completed and passed your insurance license exam, you’re not quite in the clear yet to begin selling. Licensed insurance agents are required to complete and pass an annual exam on the rules and regulations of selling Medicare plans as stated by the Center for Medicare and Medicaid Services (CMS). This test is called America’s Health Insurance Plan (AHIP) Certification. The cost of the test typically runs around $175, however, some insurance carriers, FMO’s, and IMO’s offer a discounted rate.
In order to begin selling Medicare plans, you will need to be appointed with various insurance carriers. Each insurance carrier requires insurance agents to complete an annual certification exam and a contract. Carrier certifications and contracts need to be completed for each carrier you wish to sell. For example, if you want to sell Medicare plans from Aetna, Blue Shield, and Cigna you will need to complete carrier certifications for each provider.
Agents partnered with AGA have access to a full list of insurance carrier certification guides, monthly carrier training courses, and continuous hands-on support.
Estimated Cost of AHIP Certification: $175
3. Purchase Errors & Omissions Insurance
Errors & Omissions insurance is intended to protect an insurance agent from legal action should they unintentionally provide misleading or incorrect information to a client. While E & O insurance is not required to become an insurance agent, most insurance carriers require it in order to sell their products. A typical E & O policy can cost around $300-$700 a year.
Estimated Cost of Errors & Omissions Service: $500/year
4. Contract with an FMO
Many insurance agents find success in partnering with a Field Marketing Organization also known as an FMO. A Field Marketing Organization is an entity that provides independent insurance agents and brokers the opportunity to offer insurance products from multiple carriers in order to be as competitive as possible. FMO’s essentially help take the day to day load away from an independent insurance agent by offering assistance in lead generation, marketing, training, contract writing, and more.
There are many perks to joining an FMO for example, at AGA we offer our agents a 50% co-op marketing program that covers half of their marketing cost. This is extremely beneficial as marketing costs can be very expensive. While there are no monetary costs to joining an FMO, partnering with the wrong one may cost you in other ways. Be wary of FMO’s that offer partial commissions, captive contracts, and little to no lead programs or marketing assistance.
Estimated Cost of partnering with an FMO: $0
Now that you’re a licensed insurance agent what comes next? Well for starters, you’ll need leads and that’s where marketing comes in. Leads are the lifeblood of every independent agent and broker’s business. There are multiple marketing channels in which you can reach your target market such as:
- Direct mail
- Email Marketing
- Social Media Marketing
- Radio Ads
- Paid Ads
- Events & more.
Marketing costs can vary depending on different channels, duration of the campaign, competition within the channel, etc. For example, a direct mail campaign of 1000 pieces can cost around $600 while a single social media ad can cost between $25-$100. Marketing is a monthly expense you will need to budget and plan for in order to keep receiving leads. Many agents find it easier to partner with an FMO that provides marketing assistance. At AGA, we have several successful Medicare lead channels that have helped agents scale their business in just a few short years.
Estimated Cost of Marketing: varies
While there is a bit of an upfront cost to becoming an insurance agent, the benefits outweigh the costs. A career as an Independent Insurance agent selling Medicare can be extremely lucrative and rewarding. So now that we’ve answered the question, “How much does it cost to become an Insurance Agent,” are you ready to start your career? We hope so!