Insurance license

Checking whether someone is licensed means checking one of several separate permissions. The producer license says a person or agency may sell, solicit or negotiate certain lines of insurance in a certain state. Whether that person can act for the insurer on your quote, and whether that insurer may write policies in your state, are different questions with their own answers. None of the three decides what your policy pays.

What a license changes, and what it leaves alone

A license controls who may legally arrange your coverage. The amounts you pay and receive come from the quote, the declarations page, the policy form, its endorsements and the law. Here is the split in a simplified homeowners example using figures from the NAIC's sample declarations page (opens in a new tab).

Nothing in that arithmetic depends on the producer's license, and the producer's pay is a separate question to ask the agency. A license will not turn an excluded loss into a covered one or raise a limit.

Licensing fees are paid by the licensee. In Connecticut, a producer business entity license runs two years, with a $130 initial fee and a $160 renewal fee, according to the Connecticut Insurance Department's producer business entity page (opens in a new tab). Those are regulatory fees, not a charge added to your premium.

Lines of authority, appointments and other license variations

A license is narrower than the word "licensed" suggests, in these ways.

• Lines of authority. Connecticut licenses producers for life, accident and health or sickness, property and casualty, personal lines, variable life or variable annuity, credit, and limited-lines travel. Authority for life insurance does not carry over to property insurance.
• Individual or business entity. A person holds an individual producer license; an agency may need its own license and a designated responsible licensed producer.
• Appointment. An appointment ties a licensed producer to a specific insurer as its agent, and it can end while the license stays active.
• Insurer authorization. A certificate of authority lets an insurance company, the risk-bearing entity that writes policies and pays claims, do business in a state, as described in the NAIC's Uniform Certificate of Authority Application (opens in a new tab). It is a separate record from any producer license.

The license also sits apart from job titles. An agent generally acts for an insurer and a broker for the customer, though the relationship varies by state, according to the NAIC's guide to choosing an insurance agent (opens in a new tab); see insurance brokers vs agents and independent vs captive insurance agents for those roles. A "financial advisor" title by itself does not establish an insurance license, and an agent selling variable annuities or variable life insurance must also hold a securities registration, according to FINRA's page on insurance agents (opens in a new tab).

Where the term comes up

Licensing questions arise with every kind of personal and business insurance. You meet them on a quote or application that names the agent, agency or insurer; on a binder that identifies who placed the coverage; on a renewal notice when the producer changes or an appointment ends; and in a claim letter that names the insurer or claim representative. The declarations page names the insurer and often the agency, but usually not the producer's license number or the insurer's certificate of authority. For health coverage bought through the Marketplace, agents and brokers must be licensed in their states and have signed agreements to sell Marketplace plans, according to HealthCare.gov (opens in a new tab).

What Connecticut and New York require

Connecticut defines a license as a document authorizing a person to act as a producer for the lines of authority it lists, and states that the license does not create authority to represent or commit an insurer, under Conn. Gen. Stat. § 38a-702a (opens in a new tab). Selling, soliciting or negotiating insurance without a license for that line is prohibited by § 38a-702b (opens in a new tab), and insurers and producers may not pay commissions to someone who needs a license and lacks one under § 38a-702l (opens in a new tab). A producer may act as an insurer's agent only once appointed, and the insurer must file the appointment within 15 days after the agency contract is signed or the first application is submitted, under § 38a-702m (opens in a new tab).

New York bars anyone from acting as a producer without a license in force under N.Y. Ins. Law § 2102 (opens in a new tab), and it licenses agents and brokers separately under § 2103 (opens in a new tab) and § 2104 (opens in a new tab). Every insurer doing business there must file a certificate of appointment for a producer acting as its agent under § 2112 (opens in a new tab), so a New York producer can be licensed and still need an appointment for a given insurer.

Questions to ask the agent or agency

These questions cover the license, the insurer and the policy; the guide to choosing an insurance agent goes further.

1. What state license and line of authority cover the policy I am buying? A license is limited to the lines it lists.
2. Are you appointed or otherwise authorized to act for the insurer on my quote? The license alone does not create that authority.
3. Is the insurer authorized to write this coverage in my state? The insurer's certificate of authority is a separate record from the producer's license.
4. Which policy form, exclusions, endorsements, limits and deductible control my claim? The contract, not the license, decides what is paid.
5. How are you paid, and is there a separate broker or service fee? Agents may receive insurer commissions, brokers may charge fees, and this varies by state and product.

Frequently asked questions

Short answers on licensed agents and insurers.

Does an insurance license guarantee my claim will be paid?

No. Claim payment depends on the policy's coverage, exclusions, conditions, limits, deductibles, endorsements and the law that applies. If the insurer itself is not authorized in your state, regulatory protections and claim handling can come into question, so confirm both the producer and the insurer.

What happens if my agent's appointment with an insurer ends?

The producer can stay licensed while no longer appointed by that insurer. That can affect new business, servicing or who handles your renewal, so ask who your policy's servicing agent will be.

Are agents and brokers licensed the same way everywhere?

No. Connecticut uses producer licensing with lines of authority, New York licenses agents and brokers separately, and California uses distinct license classes such as personal-lines broker-agent and surplus-lines broker, according to the California Department of Insurance (opens in a new tab).