retire with


Succession Planning Option #1: Pass Your Insurance Business Off to Your Kids

Passing your book of business on to your kids is probably the most obvious option when we look at retirement options. However, it’s not always ideal.

For starters, you have to make sure your kids want to be in the insurance business.

  • Do they enjoy helping people?
  • Are they naturally conversational?
  • Are they willing to work hard for the payoff?

Not everyone is suited for this business, so just assuming that your kids will be your succession plan without really thinking it through can be a big mistake.

For some people, they have a son or a daughter, but they’re not in the business. If that’s the case, you can’t expect them to leave their career and pick up where you left off. If I had to put a number on it, I’d say only 10% of agents have kids to pass their books down to.


Figure your gross commission

The value of your book of business will be a multiple of the gross commission, and that multiple can range depending on a variety of factors and situations. I’d say that in general, it’s anywhere from 1.5x-2x your gross annual commissions, though I have seen some guys reference a multiple as low as 1x. In those cases, someone usually just buys the book and lets it fizzle out. Their plan isn’t to service the customers – just to end up on the right side of their investment.


Succession Planning Option #3: Let Your Business Run Off

I don’t recommend this option, but in reality, this is what most agents will do.

It can feel like the easiest option, because it doesn’t really require any effort from you. However, while it seems easy, it’s really not. You will pay in the long run.

This is the agent that’s kind of still in it… but they’re really not.

Customers love you, but they get nervous, because they aren’t really being serviced anymore. The customers keep their insurance, and it’s still good insurance, but there’s no customer support.

The agent doesn’t really do anything – they don’t follow up with their customers, they don’t schedule annual reviews… they just let their business run off.

At this point, a lot of guys don’t even have a business model to service their customers, so they’ll try to service them as long as they can, and then it just fizzles out.

This is honestly the lazy way out. It’s the easiest thing to do for the time being, but it’s awful for the customers, and ultimately, it’s awful for you.

We also valued this as good will.


This means that the money we pay him does not have to be counted as commission expense (or income). In other words, he counts it as capital gains, which costs a lot less in taxes.


How You Can Be Paid For Your Book of Business

Lump sum Over time As-earned
Lowest valuation Middle valuation Highest valuation
All your money up-front Your money is guaranteed Money is not guaranteed – need to trust your buyer
Risky for the buyer Risky for the buyer Not risky for the buyer

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Live Oak Bank ROI   multiples of commissions vs EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) multiples

It is estimated that 80% of businesses for sale ultimately do not end up selling



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Publication 537 Installment Sales–2018.pdf#page=9

Topic 705 Installment Sales

Article Clipping


Beneficiary Designations Versus a Commission Protection Plan


Phil Calhoun is owner and publisher of California Broker Magazine. Phil also is a leader in coaching health insurance professionals. He is an active member of several insurance associations including the California Association of Health Insurance Professionals (CAHIP) and local chapters in Orange County, Los Angeles, San Diego and Inland Empire Health Insurance Professionals. He attends many state and local California chapter meetings.

Phil’s book, “The Health Broker’s Guide: To Protect Grow and Sell Commissions” is available free at

He offers complementary 15-minute coaching sessions. To schedule a phone call Click Here




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Payroll #Deduction IRA

Payroll Deduction IRA for Small Biz # 4587

Payroll Deduction IRA

A payroll deduction individual retirement account (IRA) is an easy way for businesses to give employees an opportunity to save for retirement. The employer sets up the payroll deduction IRA program with a bank, insurance company, or other financial institution, and then the employees choose whether to participate. Employees decide how much they want deducted from their paychecks and deposited into the IRA. They may also have a choice of investments, depending on the IRA provider.

Many people not covered by an employer retirement plan could save through an IRA, but don’t. A payroll deduction IRA at work can simplify the process and encourage employees to get started.

Under Federal law, See Publication 590 A individuals saving in a traditional IRA may be able to receive some tax advantages on the money they contribute, and the earnings on the contributions are tax-deferred. For individuals saving in a Roth IRA, contributions are after-tax and the earnings are tax-free.

Advantages of a payroll deduction IRA:

  • Simple for employees to set up an IRA.
  • Employees make all of the contributions. There are no employer contributions.
  • Many employees find smaller, regular contributions a more manageable way to save.
  • Low administrative costs.
  • No filings with the government to establish the program or any annual reports.  
  • No minimum number of employees required.
  • Program will not be considered an employer retirement plan subject to Federal reporting and fiduciary responsibility requirements as long as the employer keeps its involvement to a minimum.
  • May help attract and retain quality employees.
  • Learn more - read Payroll Deduction IRA for Small Biz # 4587

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