Life Insurance Compensation...As Earned or Advanced Commissions?

[AtlantaLife&Health]

I just want to know what the preferences of some of the other agents are. Do you prefer commission advances or as earned pay? Advance pay looks great because you get a chunk of money. As earned looks great because it can provide future income if you produce on a consistent basis. Charge backs scare me. I'd hate to go out and write $10K one month and then have things start to lapse in a month or so. Do any of you recommend one or the other? Thanks.

 

[somarco]

Sell annual premiums and you won't have to worry.

That's what I do.

 

[Newby]

I just want to know what the preferences of some of the other agents are. Do you prefer commission advances or as earned pay? Advance pay looks great because you get a chunk of money. As earned looks great because it can provide future income if you produce on a consistent basis. Charge backs scare me. I'd hate to go out and write $10K one month and then have things start to lapse in a month or so. Do any of you recommend one or the other? Thanks.

I have never found any carriers that pay more for as earned so to me it doesn't make sense not to take the advanced.

I create a reserve account of 15% of my gross commissions that are held in a separate account. Then if I have a chargeback, the money is in the reserve account to pay it.

If your reserve account builds up to thousands and thousands of dollars, you pay yourself a nice bonus. If it doesn't at least your chargebacks are not interupting your living expenses.

 

[David C]

You will be surprised at the number of people that can write you a check for the annual premium. It's more than you think, sometimes, though, they have to be "trained" to write that big check.

Lapses should not be a problem.

I prefer as earned. If you can afford to go as earned you will never regret it!

 

[xrac]

If you are disciplined like Newby and have the resources to handle chargebacks then take advanced commissisons. If you are a spendthrift and always broke you had better go as earned.

 

[djs]

With life policies, either get an annual check or setup direct debit. Anything else will get you in trouble.

If you write more than a few a month, you won't have a problem with advances. In the event of a lapse, it won't have the same impact as when you only write 2 and have 1 from a previous month lapse, taking a huge chunk of your check.

Of course, if you have many life lapses, you aren't doing your job. It doesn't help anyone to write a policy that doesn't stay in force.

Dan

 

[somarco]

You will be surprised at the number of people that can write you a check for the annual premium.

You just have to ask.

I always quote annual premiums. Granted, I don't write a lot of life, maybe $5000 - $8000 per year. But all of them are annual premiums.

Wrote one a few months ago. $1400 or so. The lady asked if she could pay it quarterly, so I re-quoted it that way and pointed out she was paying extra for the privilege of paying quarterly.

She put the annual premium on her credit card.

I have a buddy in TN who is a life agent and sells mostly permanent. The largest premium he collected was $140,000 from a business client.

All he does is ask.

We are a society of monthly payments but nothing wrong with quoting annual premiums. I always figured if they couldn't afford an annual premium it will probably lapse in a few months any way.

In the last 4 years all but one policy was written on an annual premium. The guy was out of work and wanted to pay quarterly. He kept the policy at least 12 months.

Sometimes folks will surprise you.

 

[bill3173]

If you are younger, and have a little "extra" money, go as earned. If you are older, there's a greater chance that you won't live to collect the entire fyc, take advances.

If I were Somarco's age, I'd be demanding annual premiums or taking advances right and left.

 

[dgoldenz]

Most clients will want to pay annually or with an ETF set up to withdraw each month. Usually on smaller premiums or higher net worth clients, they will elect to pay annually. The extra 8% or so premium for paying monthly adds up quite a bit over a lifetime when you're looking at $10-15k premium/year. When you're looking at $500 annual premium, some would rather just pay it monthly and accept the extra $40/year or so in premium since it fits their budget.

 

[Newby]

In my line of business (funeral preneed insurance) you are at risk of chargebacks regardless of how they pay. In fact around 50% of my business is single pay but if they die in the first year you are still charged back.

With Medicare Advantage, we have found that you can have chargebacks just through CMS monkeying around with the commissions halfway through the selling season.

If someone pays annual for their med sup or health insurance and died 4-months in, wouldn't that be a chargeback too?

I still say it's wise to give yourself a 15% reserve account. The worst that can happen is you end up with an extra account with money sitting in it. Boo-Hoo

I guess I'm what you would consider ultra-conservative but I always sleep good at night.