Starting an independent insurance agency is an exciting venture, but the big question always lingers—how much money do you really need to get started? The answer varies based on individual circumstances, but understanding key expenses and financial planning can help set the right expectations.
When people think about launching a business, they often picture hefty upfront costs—brick-and-mortar offices, payroll, equipment, and more. But in today’s world, especially post-COVID, the traditional agency model has shifted. Many successful agencies now operate entirely remotely, eliminating one of the biggest expenses: office space. Take that out of the equation, and the financial barriers to entry become much lower.
So, what do you actually need? First and foremost, a management system. It’s far easier to set up from day-one rather than trying to implement one later. Next, you’ll need essential insurance coverages for your agency, including E&O, cyber liability, and a business owner’s policy (BOP). You should also invest in comparative rating software, a phone system (which can be as simple as a mobile plan), and ensure your agency is properly licensed and legally formed. While none of these are overly expensive, they do add up.
The real financial challenge comes down to time. Unlike a traditional job where you earn a paycheck at the end of the week, running an independent agency means you don’t get paid until you start writing policies—and even then, commissions take time to process. You could go 60 days or more before seeing your first check. That’s why having enough personal savings to sustain you for at least three to six months is key. If you can go a year without stressing over income, even better.
For those who don’t have the cash reserves to ride out the initial slow period, partnerships can be a smart option. Whether it’s teaming up with someone who brings capital to the table or relying on a spouse’s steady income, there are ways to make the transition smoother. The key is preparation—knowing your financial runway and avoiding the temptation to chase bad business just to stay afloat.
No matter how you approach it, starting an agency isn’t about cutting corners. It’s about setting yourself up for long-term success. Figure out what you need to live on, account for the must-have expenses, and give yourself the financial cushion to focus on what matters—building a business that lasts.