How Much Does it Cost to Start an Insurance Agency?

There are numerous ways to start an insurance agency. The key is to spend your startup capital wisely in ways that will grow your commission income. By maintaining an investment mindset and working with the right carrier partner, you can successfully launch your business while keeping costs down. 

This is where Firefly is invaluable for new agents.

You save money by taking advantage of our packaged operating costs that include E&O insurance coverage, a comparative rater, and an insurance agency CRM and management system (using EZLynx’s Advance Package – a powerful tech-stack for your agency). 

These savings leave more of your money to run and market your agency. 

To help you make the most of your budget, let’s look at the most common expenses new insurance agents incur when starting an insurance agency.

1. Marketing Costs

The most important investment you can make is in an attractive and user-friendly website for your agency. This will allow your customers to learn more about your products and services and give you a destination to direct prospects to. 

Other insurance marketing strategies include:

• Sending direct mailings (however, only about 1% of people respond)
• Sponsoring school plays and other local events by advertising in the program
• Investing in memberships to associations or networking organizations
• Networking within specific groups, for example, restaurant owners
• Hiring a service that makes phone calls and directs business to you
• Creating a Google Business Profile and investing in Local Service Ads

Consider a mix of immediate and long-term marketing tactics. Networking might seem like a slow-growing option, but it is definitely worthwhile. Learn which marketing methods work for you and spend your resources accordingly. 

2. Office Space

Having an office is NOT a requirement of being a Firefly agent. However, some agents prefer to have a dedicated office space. 

Most importantly, ensure you have a space to focus on growing your business without distraction. For many, a home office works fine. For others, a separate space or office share is a better option for their insurance startup.

3. Phone and Internet Service

Successful insurance agents need an effective communication system. This means establishing an online presence on Facebook, Linkedin, and through an agency website. These all require a solid internet connection so that you don’t miss out on a potential lead.

You’ll also need a dedicated professional phone line so that missed customer calls don’t go to your personal voicemail. Our work-from-home article outlines several phone service options, including adding a business line to your existing phone. Whatever solution you choose, make sure that you keep your business communications separate and professional.

4. Staff

Growing your agency could mean hiring additional people. Ideally, you hire those whose strengths offset your weaknesses. For example, if you’re bad at cold calling, car changes, customer service, or billing, you could hire staff members who excel at these tasks. The right balance of skills will keep your agency functioning and profitable. 

But most new agents avoid that cost. They focus on marketing and writing business and only add staff when they have enough cash flow to cover it.

5. MVR Reports

Motor vehicle reports (MVRs) are quick background checks on drivers or households. Carriers require them before you can write an account. These reports typically cost money, but if you follow Firefly’s process, you’ll rarely have to pay to run one. You’ll learn about them in your initial training.

6. Business Cards and General Office Supplies

To be an agent, you must have a good computer, printer, and scanner. Our work-from-home article outlines recommendations for each of these, including how to use your mobile phone as a scanner. You should also consider the cost of general office supplies so that you always have the tools you need on hand. 

Business cards are an inexpensive and useful marketing investment that you can pass out to potential customers or at networking events. Many online companies design, print, and ship cards to your address. 

7. Licenses and Renewals

You will have to pay for your insurance licenses (and their renewals) in each state where you do business. Firefly’s contract requires that you maintain all legally required licenses to be an agent with us.

8. Liability Insurance for Insurance Agents

General liability Insurance protects you against most kinds of claims that could arise in your business. For example, if someone slips and falls when visiting your office and wants to sue you or Firefly, a general liability policy will cover them and us.

9. Insurance Continuing Education

Costs and requirements for continuing education (CE) vary depending on your state but are necessary to maintain your license. For example, in Ohio, an agent must take classes and a test every two years. 

Fortunately, the cost of CE is never too large. For example, many online services let you complete your CE courses from home and cost less than $100.

Invest Wisely in Your Insurance Agency

Hopefully, this guide gives you a good overview of the expenses you’ll encounter when starting an independent insurance agency. The main takeaway is this: Focus on the startup investments that will help you make money and grow your agency. 

Sadly, we’ve seen people choose to work with large networks that charge large fees, or monthly recurring fees (not for software, or E&O, but just to join and stay in the network). We’ve seen agents try to get away from those fees by canceling their contract and who are then sued by their network. It’s awful and you don’t want that to happen to you.

That’s why the most significant investment you can make is in the right partnerships, including the right carrier network partner. If you’re ready to take the leap and become an independent agent, download our ebook to learn how Firefly supports you at every step. 

You’ll learn how to set up your office, get referrals, and close deals immediately. And how our agent-friendly contract helps you start your agency with low costs, powerful tools, and increases your chance of success.