- What are the requirements to become a life insurance broker?businessman image by Christopher Hall from Fotolia.com
Life insurance brokers are independent representatives, often working with multiple companies, and have the freedom and flexibility to choose their own career paths. Unlike captive employee life insurance agents, brokers can sell products for any company with which they are registered, and are not obligated to represent any particular insurance carrier. Since they typically earn only commissions and are not paid a salary, there are only a few requirements to become an independent life insurance broker. - All life insurance brokers are required to obtain an insurance producer's license from every state in which they plan to conduct business. Each state's insurance department may have slightly different rules and regulations regarding the solicitation and sale of life insurance products, and it is the broker's responsibility to learn these differences and follow proper procedure. Obtaining a producer's license consists of completing a pre-licensing educational course, successfully passing the state's life insurance exam and paying the appropriate fees.
- All life insurance brokers are required to obtain errors and omissions insurance, commonly called E&O. This is a type of professional liability insurance policy that provides protection if the broker is ever found to be responsible for a mistake made during the sale of a life insurance product that resulted in financial loss to the customer. Life insurance brokers can obtain E&O insurance from any licensed provider in their state, and can customize the policy to suit their needs and budget.
- To maintain a valid insurance producer's license, brokers are required to complete a minimum number of continuing education courses before the expiration of their state's license. Every state has slightly different regulations regarding the number of continuing education credits required, and the length of time in which they must be earned. The purpose of continuing education is to ensure that brokers remain informed about industry changes, legislation, new products, and ethics. If a broker does not successfully fulfill the education requirements set by each state, his life insurance license will be suspended until the criteria are met.
- Since life insurance brokers are independent representatives, commissions earned are paid in full, and no withholdings are made by the insurance companies. It is the broker's responsibility to set aside a portion of each paycheck for income tax purposes and forward, if necessary, a quarterly tax estimated payment to the IRS. Additionally, none of the insurance carriers will offer an independent broker access to employee benefits like health insurance or a retirement plan. The broker must arrange his own independent health plan and retirement account.
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