Insurance Agency Sale Agreement

Insurance agencies face a dual competition problem. They must be able to maintain and maintain competitive relationships with other agencies, but they must also fight the potential for loss of customers directly to the insurance companies and/or wholesale agencies with which they deal. In extreme cases, an agency may be subject to an exclusive obligation to produce activities only for certain insurance companies or general agencies, which could significantly limit future business opportunities. It is therefore essential to carefully consider all affiliation agreements in order to identify such provisions. In addition, the Agency must keep the right “lines” under its agency license. For example, many states allow an insurance agent to place insurance coverage such as life, health or title, without even obtaining authorization for such lines for its licenses. Therefore, a potential buyer should confirm that their destination has all the necessary licenses, depending on where they sell their business. And these licenses should not have expired and contain all the correct insurance lines, both to continue their current activity and to write the insurance lines that the buyer ultimately wants for the agency. Fortunately, even if a buyer wishes to transform the target company after the purchase of a limited liability company into a limited liability company, this can be achieved in accordance with existing corporate conversion laws, without the need to re-apply for agency licences. No one forgets to include the purchase price in the agreement, but don`t forget other critical conditions such as how they are paid, when paid, consequences and corrective measures in case of non-payment, including a security interest in assets, etc. The diversity of payment methods and conditions is limited by your imagination. You`ll find a few examples in our checklist – please also indicate how the parties weigh the purchase price for filing tax returns.

Insurance agencies and deal values are close to an all-time high and all expectations are that the deal flow in 2019 will be equal to or greater than last year`s figures. And while the reported figures tend to be larger agency transactions, there are many agencies involving small local businesses that are not included in industry reports. In addition, an insurance agency cannot comply with the Law on Companies of a given state if it has not properly acquired its foreign qualification for activity with the competent Secretary of State or an equivalent state authority. It is not always enough to hold a non-resident agency license in a state, and we have sometimes seen states impose additional taxes and fines as part of an agency`s inability to properly acquire its foreign qualification. The agreement should contain assurances and guarantees, for example, commitments. B of each party as to the execution of certain things. For example, the buyer wants the seller to inser and guarantee that at the time the expiry policies were issued, the seller was licensed as an insurance producer and had the right to make transactions and that the seller did not receive a significant number of letters of intent that should not be renewed in the last twelve months, which reduced the value of the assets to be acquired.