For many people, being an independent contractor sounds like a dream. You set your own hours. You may be able to work from home. If you are thinking about contracting with insurance companies, you won’t be able to work in pajamas (most of the time), but you will be part of an industry that has a significant impact on people’s lives.
Choosing an Insurance Career Path
The insurance industry offers a wide range of career paths. You’ll find administrative assistants, actuaries, marketing professionals and data scientists working in insurance. These positions may be staff positions or contractor positions.
A staff position is traditional employment. Your employer dictates your schedule and your responsibilities. Your employer also takes out federal and state taxes from your pay and may offer benefits like health insurance and retirement accounts.
Contractor positions are a type of self-employment. You contract with an insurance company to provide certain services. You’re responsible for your taxes and the equipment you need to complete your work. You also control your schedule. If you want to be a contractor in the insurance industry, a few options include being an insurance agent, an insurance broker or a claims adjuster.
What Is a Claims Adjuster?
Claims adjusters evaluate insurance claims. They decide whether insurance companies should approve a claim, and they may also decide how much the insurance company should pay. Some claims adjusters are staff members, but others are contractors.
For example, independent claims adjusters typically work for multiple insurance companies. They may specialize in evaluating claims after major weather events like hurricanes or tornados.
Public insurance adjusters are also independent. They typically contract with individuals or business owners. Homeowners may consider hiring a contractor for insurance claim help if their insurance company denies their claims.
Becoming a Claims Adjuster
Claims adjusters typically need a minimum of a high school diploma or GED. Some positions may require a bachelor’s degree or relevant experience. For example, if you’d like to be an auto claims adjuster, it would help to have experience working in or around auto repairs.
You may also need a license from your state. For some states, this requires passing an exam. You may have additional requirements to meet to become a public adjuster. If you’re planning to be an independent adjuster, once you have the appropriate education and licensing, you’ll need to contract with insurance companies as an insurance claim contractor. You can look for companies advertising positions for adjusters or contact insurance companies directly.
If you’re planning to become a public adjuster, your state may have laws regarding how much you can charge and how to conduct business. For example, in Florida, you can’t solicit business until at least 48 hours after an event that might cause a claim, like a hurricane, has occurred. You can also only seek new business between 8 a.m. and 8 p.m. Monday through Saturday.
What Is an Insurance Broker?
An insurance broker is an insurance sales professional who represents clients. A broker works with clients to find the best coverage, then helps clients submit an application. Brokers aren’t appointed by insurance companies, which means that brokers can’t authorize an insurance policy. An underwriter from the insurance company has to sign off on the policy.
What Is an Insurance Agent?
Insurance agents represent insurance companies. A captive agent represents one company. An independent agent represents multiple companies. Insurance agents are appointed by the insurance companies they represent. They may have the authority to “bind” coverage, which means that they can initiate a policy.
Requirements to Become an Insurance Agent or Broker
Brokers and agents both engage in insurance sales. Agents are affiliated with one or more companies, while brokers represent consumers or businesses and aren’t appointed with specific companies. The path to becoming both types of insurance sales representatives is similar.
You typically only need a high school diploma or GED to become an insurance sales representative. A bachelor’s degree can be helpful, though, and in particular, degrees in business or finance. The next step is to become appropriately licensed in your state. You typically need to pass one or more exams to become licensed.
Getting Established as an Insurance Agent
Once you have your license, insurance agents will want to be appointed with one or more insurance companies. Some companies allow you to contract with other companies. Other insurance companies only allow you to work for them. If you sign up with one of these companies, you’re a captive agent.
Depending on the company you sign up with, you may receive additional training. They may also connect you with a more experienced agent to work with so you can learn more about the business.
Getting Established as an Insurance Broker
The best way to gain experience as a broker is to work with a brokerage. This gives you a chance to see how more established agents run their business and gain expertise. If you already have a handle on the business, you could start advertising your services and networking to find clients.
As with any business, word of mouth is essential. The insurance industry is also highly regulated, so make sure you’re familiar with the insurance laws in your state. Insurance agents may have professional insurance through the insurance companies that appointment them. As a broker, you may need to purchase your own liability and errors and omissions insurance when you strike out on your own.
The Benefits of Contracting With Insurance Companies
Working as an independent contractor for insurance companies has several benefits. These include:
- Flexibility with your schedule.
- Being able to determine the direction of your business.
- Choosing your own work equipment.
- Choosing which companies and clients you work with.
It can be very satisfying to be self-employed. Working as a contractor in the insurance industry gives you the freedom of self-employment and the support of an established industry.
The Drawbacks of Being a Contractor
As you decide whether to pursue being a contractor with insurance companies, it’s essential to consider the drawbacks as well. These include:
- Being responsible for setting aside federal and state taxes.
- Potentially erratic income.
- Having to build your business from scratch.
- Finding and paying for your own benefits like health insurance.
- Setting up your own retirement savings.
- Buying your own business insurance.
- No paid time off.
Having some savings set aside before you start your business can be a big help to ensure you can pay your bills while you start your business. Your state’s health insurance marketplace can help connect you with health insurance options to keep you and your family covered.
Being an independent contractor can be rewarding, but it’s essential to weigh the pros and cons. If you’re new to the industry, you may want to start with traditional employment so you can learn and gain experience before you strike out on your own. When you’re ready to go on your own, look for companies with a track record of support for their contractors and have a plan for building and growing your business.
- Insurance Information Institute: Careers in Insurance
- New York State Workers' Compensation Board: Insurance Agents — Certain Licensed Insurance Agents Are Independent Contractors
- Bureau of Labor Statistics: What Claims Adjusters, Appraisers, Examiners, and Investigators Do
- Bureau of Labor Statistics: How to Become a Claims Adjuster, Appraiser, Examiner or Investigator
- FindLaw: What Is a Public Insurance Adjuster?
- FindLaw: Florida Statutes Title XXXVII. Insurance § 626.854. “Public adjuster” Defined; Prohibitions
- Kaplan Financial Education: How to Become an Insurance Claims Adjuster
- Bureau of Labor Statistics: How to Become an Insurance Sales Agent
- Bureau of Labor Statistics: Self-employment: What to Know to be Your Own Boss
- J.D. Power. "About Power Circle Ratings," Accessed Oct. 31, 2019.
- Insurance Information Institute. "Background on: Buying Insurance," Accessed Nov. 1, 2019.
Melinda Hill Sineriz is a freelance writer with over a decade of experience. She specializes in business, personal finance, and career content. She has worked in sales and has managed her own business for more than a decade. She has also written content for businesses in various industries, including restaurants, law firms, dental offices, and e-commerce companies. Learn more about her and her work at thatmelinda.com.