Why Insurance Agents Need Capital?

Being an insurance agent is unlike any other career. It is very time consuming. Even if you work a 40 hour work week, there is an enormous amount of prep work involved from organizing your calendar, sending appointment reminders, and filling out insurance applications. For many people, the life of insurance agent is too much. However, if you decide otherwise, you will need adequate capital to become an insurance agent, even if you are a captive agent with a guaranteed salary.

Understanding the Cost of Being an Insurance Agent!

Most insurance agents without adequate savings do not last long in the business. And many insurance companies expect its agents or financial advisors to generate leads of their own. In general, if you are just starting in the insurance business, you probably don’t have an established clientele. Therefore, unless you have a rich uncle in Florida who needs a one million dollar annuity policy, you are going to be knocking on doors or cold calling Monday through Saturday. Once you get tired of dialing, you will pursue other marketing options.

At every insurance sales office, you will find one veteran insurance agent that supplies the “rookie agents” with marketing tips. Some veteran agents will tell you to do some of the following activities to generate your required 15 to 20 insurance appointments per week:

1. On a monthly basis, hold a free seminar (e.g., life insurance needs or long term care insurance)
2. Buy mailers from the company or a marketing list company (e.g., mailers for disability insurance with a reply card)
3. Buy online insurance leads (e.g., life insurance leads or home insurance leads)
4. Join an organization, such as the Chamber of Commerce
5. Buy a TV, radio or newspaper ad
6. Have a professional brochure made to give to potential clients.

Now, the above mentioned marketing ideas cost money. You can spend a considerable amount of money on a seminar, for the advertisement of free food generally brings in a crowd. Otherwise, you may be disappointed with the total attendance at your seminar. Actually, if you attempted to do all six marketing ideas, you could easily spend $600 to $2,000, per month, on average. Luckily, you have the ability to print enough brochures to last you for a year, and the organization’s dues are due once a year. Still, marketing campaigns can be very expensive. But remember, you are trying to attract a certain target market that will generate a numbers of good leads each week; therefore focus on making your marketing strategy work. Otherwise, your marketing efforts could prove to be futile, if you attracted only unqualified candidates for your insurance products and/or financial advising services.

Without question, marketing is the most costly aspect of being an insurance agent. However, without a good marketing plan, you can forget about making a decent income. You will eventually go broke as a full commission insurance agent because of poor sales totals. On the other hand, if you are a salaried employee, you will soon be fired if you cannot make the sales quota.

Besides the marketing costs, you will incur many driving miles in this industry, even if you never have an appointment outside of the sales office. You will be driving to various company sales meeting; unfortunately, some insurance companies require you to drive to another state for meetings. Also, you might become more active in certain organizations, such as the Kiwanis International. As a result, you will be spending more money on gasoline.

How Much Should You Have Saved?

You never can save too much before becoming an insurance agent. Surely, if you plan to become a full commission insurance agent, you should have $30,000 to $50,000 in liquid assets. Now if you are required to purchase an insurance agency, you should have $75,000 to $100,000 in liquid assets. If you are a salaried employee, a savings of least $10,000 would be helpful. Some insurance agents receive a salary for a limited period of time, such as six months; these agents should save at least $15,000 to $20,000. While these savings totals are not based on empirical research, you can ask other insurance agents for their opinions. Nevertheless, you will need capital to start a successful marketing campaign aimed at finding qualified insurance and/or financial advising prospects within a strong target market.