Step-by-Step Guide: Launching Your Independent Insurance Agency in Illinois

Establish your Agency.

Establishing an independent insurance agency in Illinois involves several legal steps and requirements.

Here are the primary steps you'll need to take:

Business Structure and Registration:

• Select a business framework (LLC, S-Corporation, etc.) and register your business with the Illinois Secretary of State.
• Acquire an Employer Identification Number (EIN) from the IRS, especially if you intend to hire employees.

Licensing:

• Producer License: Obtain an insurance producer license from the Illinois Department of Insurance.
  • Attend licensing classes: ABRC.com
  • Apply for license: NIPR.com
• Agency License: To operate as an agency, you will need a separate agency license.

Insurance:

• Purchase business insurance to protect the assets of your agency – business owners, workers compensation (if applicable), EPLI, commercial auto, umbrella, etc.
• Acquire Errors and Omissions (E&O) insurance, which is crucial for protection against potential liabilities.
• It is highly recommended you obtain a Cyber Liability Policy. If you plan to join Chicagoland SIA, this will be mandatory.

Other

• Obtain a LexisNexis NODE ID – This is necessary to identify your agency for point-of-sale reports such are MVR, CLUE and credit scores for front line underwriting.

On-Going Requirements

After your agency is set up, be sure to keep up with on-going requirements:

Ongoing Compliance

• Regularly review and comply with changes in insurance laws and regulations in Illinois.

License Renewals:

• Renew licenses as required by the state. Illinois requires that insurance agents complete continuing education credits and an ethics class every 2 years to renew their license.

Additional Recommendations

In addition to these requirements, we also recommend the following be set up at the start of your business:

Technology:

• Set up necessary technology, like agency management software, to manage client information, policies, and claims efficiently.
• Obtain a Personal Lines Rating System

Digital Presence

• Invest in a website. There are many vendors that specialize in websites for insurance agencies.
• Set up digital platforms, such as Google Business Profile and Social Media Accounts.

Bank Accounts

Establish two checking accounts –

• Premium Trust – Many state laws require all premiums received from the insured be deposited into this account. If audited, you will be required to show this occurs. This account is used for agency bill premium and must always contain enough money to satisfy your obligations to your companies. Being “out of trust” is a serious offense and can result in revocation of an agency’s license.
• Operating Account – Commission checks received from your carrier companies may be deposited into this account. Money not reserved for payment to companies (your commission) may be transferred into this account from the Premium Trust Account. All agency expenditures except company account currents should be paid out of this account. .

Setting up your Independent Insurance Agency can be intimidating with all the legal requirements. However, Chicagoland SIA is here to assist you! If you become a member of Chicagoland SIA, one of our Vice Presidents will walk you through the needed steps to get your agency off the ground.