How To Become An Insurance Agent: Legal Obligations And Licensing
With many new graduates plunging into the world of actuarial and insurances, there have been many guides that explicitly focus on how to become an insurance agent. To become an insurance agent, you need to have a license, and here are the steps to follow to become one:
- Choose the type of insurance license
- Get pre-license education
- Give your exams
- Get a background check done
- Get the license
The process on how to become an insurance agent is simple on becoming an insurance agent but no one tells you the legal obligations of an insurance agent before getting into the field.
Let’s look at some legal obligations of an insurance agent.
legal Obligations Of An Insurance Agent
Insurance Agents Can Not Act As Advisors
Oftentimes, people refer to the advice of an insurance agent, however, these agents are not advisors. An agent is not required to determine coverages, propose a certain amount of minimum coverage liability, inform all of the possible insurance options, and more.
It is important to draw a line between the roles and responsibilities of an insurance agent and an insurance advisor. Although insurance agents can not act as advisors, if they have a special relationship with a business, they can.
Here are some of the acts that can constitute having a special relationship between a business and an agent.
- Determines the coverage needs of a business voluntarily
- Gives advice on the different types of policies available and the exclusions they may have
- Charges client a separate fee for advice
- Provides advice on specialized insurances if the agent is specialized in that type of insurance
- Knows the client for a long time
A special relationship between a business and an agent can allow them to determine coverages, explain the pros and cons of a policy, and more.
Licensing
In the United States, to sell insurance, you must have an insurance license. The type of license you need to get will depend on the type of insurance policy you want to sell. An agent looking to sell health insurance must get a health insurance license to do so.
Certain states have a rather strict requirement on getting a license and this includes completing pre-education. What’s important to note is that licenses expire after two years and an agent must continue their educational requirements to renew their license.
We’ve gone over the legal aspects of an insurance agent. What must an individual or potential client do before buying an insurance policy from these agents?
Potential clients or individuals looking to buy insurance policies must do their research into the type of policy that would be best for them. Remember, insurance agents are not advisors. It is best to do your research before getting into this.
You should also check the insurance agent license and verify its validity. To do that, simply contact the State Insurance Department and give them the details of the insurance agent. If the agent has a valid license, that is a good sign to continue dealing with them.
