How to Sell Your Insurance Book of Business Without Retiring

How to Sell Your Insurance Book of Business Without Retiring
November 9, 2020

For those of you who might not know us, we've bought 6 books of business in the last two years.

We don't feel we're experts, but we sure know a whole lot more than we did at the beginning. We feel we're ready to expand and do a lot more.

Now that we've partnered with Integrity Marketing Group, we have even more flexibility and creativity. The folks they have on staff are incredibly smart, and they have helped us get a clearer picture as we work on these acquisitions.

Watch this webinar recording to learn about the different ways we can structure the sale, including one new way that we think will be a great fit for a lot of agents:


Option 1: Cash Out Over Time

When somebody is ready to retire, this is the way to go. This is the perfect fit for someone who knows they're done and don't plan to get back into the business.

This is a perfect fit if you don't need a lump sum up front, but you want a good value and a guaranteed income on your book for a fixed period of time.

These are easy! We'll take every one of these we can get.

If you're interested in what the whole process looks like, we outlined those in this article: How to Sell Your Insurance Agency: Our 7-Step Process

Option 2: Cash Out Immediately

Rather than getting a payment over 4-5 years, this option is one lump sum upfront.

While most agents will probably fit better with the cash out over time option, there are some common situations where it makes more sense to be paid all at once.

For example, perhaps you're moving. We have an agent right now who works in Illinois and Arizona, and he just moved to Arizona. He's interested in selling his Illinois book of business, and that's a perfect fit for an upfront buyout.

Another example is a health issue. Our health can change, and you don't want your spouse or kids to be left with the business – you want them to be left with the money.

To get that money upfront and know your customers and family are taken care of... the cash out immediately works perfectly.

Option 3: Hybrid/Partnership

This one is really a work in progress for us, and we're also the most excited about it.

We hear so often – from one-man shops especially – that they're lonely! They want to be a part of something bigger than themselves. This partnership option is a great solution.

We'd come together and put a fair, solid valuation on your business that we both agree with. We'd then give you a big check upfront – say it's 80% of the value. Then, we'd begin servicing the book, but we're partnering with you in that service. You're staying in the game.

We'd continue to pay you an income until you know you're ready to be done. When the time period is over, we settle up with you on the 20% you left on the table, plus any new business you accumulated during that time period.

The five great parts of this hybrid partnership include:

  1. You get the process going.
  2. You get a great valuation.
  3. You get a part of that valuation upfront.
  4. You continue to be rewarded on that book until the time period is done.
  5. You get the remainder of the valuation when you're done.

Some guys have been doing this for a while, and they just want some help with the technology. Now, you have to determine how much you should be investing in technology. That can be a struggle, especially when you don't know much about it. Entering into a partnership like this can solve that problem and allow you to continue working.

Folks are excited about this idea. It's really the nicest way to transition from being full-time, and your clients really don't notice the change. We get to become friends with your customers over a few years, and when you're ready to be done, the clients are completely comfortable with it!

Selling Without Retiring: Q&As

We got a lot of questions in this webinar! Here's a sampling of the questions asked along with our answers.

Money

Q: What's the commission you make if you do a hybrid deal? Is it like you're an LOA?

A: I think there'd be some value in being an LOA. An LOA stands for licensed-only agent, which means you'd be assigning over your commissions to a corporation.

It'd make it easier for us to transition when you're ready to be done. But as far as the level of commission, it'd be the same commission you're making now. It would definitely be a captive deal, but you definitely wouldn't go backward on commissions.

Q: How are the commissions transferred?

A: What we've done with all of our acquisitions so far is what's called an assignment. This means you assign your commissions over to New Horizons Insurance Marketing on the date of closing. 

Q: If you die during the payout period, would the remainder go to your beneficiary?

A: Yes, it does. Your estate would not miss a penny. It'd be no different than if you were here the whole time.

Q: What's the typical multiplier?

A: It's really a range depending on what the book consists of, and there are so many variables. How much is life vs. Medicare Supplement vs. Medicare Advantage? How much of the Med Supp business is in the 4th and 5th year?

The multiplier relies on all of those factors, and it also depends on how you want to be paid. Do you want to be paid out in a lump sum, over time, or as a partner?

It's really a case-by-case decision.

Related: It's Time to Sell Your Insurance Business: What's It Worth?

Agent Involvement

Q: What if you already have the technology, but you need marketing assistance before you're ready to retire?

A: That's a great point. If we decide to do a partnership, we'd come together at the beginning and establish expectations. Every deal is very individualized in that way, because everyone has different needs and desires.

Q: How involved is the agent in the cash out over time model?

A: For the ones we've done, the agents aren't involved at all. They're so relieved when they aren't getting any phone calls anymore, and while they think they might write something, the end up being completely done.

Miscellaneous

Q: Are you interested in under-65 health insurance?

A: No, we aren't. We're senior specialists.

Q: How do you take over a portion of the book that isn't with New Horizons?

A: It's the same exact process as the business that is with us. The only difference is how much we make on it. Whatever override New Horizons made on top, we wouldn't make it on business that's with another FMO.

Related: Can You Be Contracted With Multiple FMOs?

Conclusion

We've started something called a Discovery Call where it's so easy to schedule a phone call on my calendar. It's a 15-minute call, and it goes right on my calendar.

It's really just an introductory call so we can get an idea of where you're at and what your book looks like. This whole process takes some time, so that's a great start no matter how close you are to retirement or selling your business.

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