Pros and Cons of Owning Your Own Independent Insurance Agency
There is always a lot of pride in owning your own company, but there is also a great deal of responsibility, work and hassle. Here’s how to tell if owning an insurance agency might have enough benefits for you to outweigh the liabilities.
Every employee has had the experience of looking at their boss and/or the owner of their company and thinking “I could do this so much better than you.” If you find yourself thinking this too often, you may soon find yourself looking into actually starting a business. And if you’ve got experience working in the insurance or financial products industries, as so many people do, then you are probably considering starting your own insurance agency.
Let’s start off with some clarifications. Any small business is either going to be an independent insurance agency (which sells policies from a number of major insurance companies) or a “captive” agency, which sells policies from just one company. To actually start providing people insurance requires something called a “corporate insurance license”, and they can cost $50,000 or more to buy. To actually be able to originate insurance policies requires over a million dollars of capital, just to start, so what most small business people want is to sell insurance, not create the policies themselves.
To sell insurance you will have to be licensed in your state for the kinds of policies you want to sell. There are three major kinds of insurance policies: health, liability, and life insurance. Many insurance licenses also let you sell financial products. Because insurance is so much of a financial product there’s a lot of overlap both in services and licensing.
The pros of having your own shop are that you get to choose which hours you work — but only to a certain extent, because you have to be on the job enough to stay in business. You get to decide how long and when you will take vacations — but again, only to a certain extent, because you have to make sure your business can stay afloat while you are gone. Another major pro is that if the business is successful, you will be the owner and will have a valuable asset that can generate income for years to come. Also, as the owner, you get to decide when and how to hire and fire people. If you are brave, you can even decide which clients and customers you want to fire.
While to pros sound great, here are the cons: you will probably work more than 60 hours a week the first years. If your agency is not successful in the first year or so (and many aren’t) you may end up not paying yourself a wage at all in order to be able to balance the books. Also, until your agency can afford to hire people for different jobs, you will be wearing a lot of different hats — accountant, computer guru, secretary, marketing manager, printer fixer, and many, many more. You will almost always have five to ten times more things that need to be done in one day than you can possibly do.
Being an owner is stressful, and so while there are dozens of benefits to having your own insurance agency, you will need to be resilient enough to handle the challenges. But if you can do it, hopefully you’ll be able to give yourself a raise.