How much cash should an insurance agency keep?

An independent insurance agency earns commissions from carriers. On direct-bill policies the carrier collects the premium and pays the agency its commission, usually the month after. Renewals bring most of the revenue back each year. New policies take months to show up in commission checks.

Payroll per run, all-in $ How often you run payroll Fixed bills per month (rent, loans, insurance, software) $ Days your customers take to pay, on average days Cash in the bank today $

Minimum to keep

Two payroll runs plus one month of fixed bills

Comfortable level

Covers costs while you wait for customers to pay, plus one month

Weeks your cash covers

If no customer paid you

The starting numbers are an example. Replace them with yours.

How cash moves in an insurance agency

Commission checks arrive on the carriers' schedule, often a month or more after the policy is written.
Renewals carry the agency. A drop in retention shows up in cash a year later.
Agency-bill premiums pass through a trust account. That money belongs to the carriers.
Producers paid on new business cost cash before their policies pay commission.

Why the usual rule falls short

Two agencies each earn $600,000 a year in commission. One is mostly direct bill. The other bills clients itself and holds premiums in trust before paying carriers. The second shows much more cash in the bank, and most of it belongs to the carriers.

How the calculator works

Result	Formula
Minimum to keep	2 × payroll per run + 1 month of fixed bills
Comfortable level	Monthly costs × (days to collect ÷ 30 + 1)
Weeks your cash covers	Cash ÷ weekly costs

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Also for insurance agency owners, see the insurance agency monthly financial report.