Getting Paid

AFRET14

New Member
I've been poring over these forums as a lurker gathering information for some time now. I'm debating making the leap into insurance sales probably as a captive to learn the ropes first. One of the things I'm still a bit curious about is how one gets paid in the industry. I keep seeing everyone use commission percentages of 40-140% plus draws and salaries... Could someone explain this in a little bit more of a "layman" detail? My apologies if there his already a topic on it and i've missed it.
Thanks!
 
It's a percentage of premium for commission. Different carriers and products pay a different percentage.

Sell a life policy at $1,000 annual premium at 110% contract and you'll make $1,100 commission in the first year.

Sell a $100,000 fixed indexed annuity at 7% commission and you'll make $7,000.

Renewals are typically much lower than first year commissions, with the exception of P&C and Med Supps.
 
Indy, thanks that makes sense. How about renewals? As I understand those are where you start to see long term income growth. How does that work?
 
One other aspect of commissions is deciding whether to take them on an advanced or as-earned basis. If you are not familiar with the difference, their names pretty well spell it out. With advances, the insurance company is advancing you money on commissions which have not been earned yet. With as-earned, you are being paid commission for that portion of the premium that has been earned. Point to remember, whenever you take advance commissions, if the policy lapses, you are responsible for the unearned portion of the advanced commission.
 
Indy, thanks that makes sense. How about renewals? As I understand those are where you start to see long term income growth. How does that work?

Renewal streams are different for each product. Some are very modest say 1-5% while others can be very robust. Some products pay no renewals. It all depends upon the product and the company and it can change overnight by government regulation, by a company being bought or sold, or by management.
 
admin: thanks, so with advance commissions you incur a risk of payback if the policy lapses? Do most agents tend to then maintain an "emergency" fund for instances such as this? I would assume careful cultivation of the crop (client base) mitigates this risk but would never completely eradicate it.

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XRAC: So, the renewal commissions (which are variables dependent on the company) are a percentage of the annual premium? For example a 1% renewal commission on a $100,000 annual premium would give you a payout of $1000 every year the policy is renewed? As long as there are no changes to the govt regulations and such? What would you say is the average policy size you experience? Have you/someone captured the numbers on what the average annual policy renewal rate is? Sorry for all the question, I'm just interested in the numbers game of the industry.
 
admin: thanks, so with advance commissions you incur a risk of payback if the policy lapses? Do most agents tend to then maintain an "emergency" fund for instances such as this? I would assume careful cultivation of the crop (client base) mitigates this risk but would never completely eradicate it.

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XRAC: So, the renewal commissions (which are variables dependent on the company) are a percentage of the annual premium? For example a 1% renewal commission on a $100,000 annual premium would give you a payout of $1000 every year the policy is renewed? As long as there are no changes to the govt regulations and such? What would you say is the average policy size you experience? Have you/someone captured the numbers on what the average annual policy renewal rate is? Sorry for all the question, I'm just interested in the numbers game of the industry.

However, some policies have no renewal trails. A lot of term life insurance is that way. What you are asking is hard to nail down because it all depends upon what type of insurance you are selling and to what market.
 
XRAC: Good point. As I'm still new to all of this my interest is leaning toward Life insurance. I also have a soft spot in my heart for LTC as my wife's family is experiencing a depressing issue with grandmother as she progresses into advanced stages of dementia and zero coverage. So the burden is on my wifes mother and aunts/uncles. I'm not so certain I could get excited about P&C unless it's one of those things you need to do to pay the bills.
 
admin: thanks, so with advance commissions you incur a risk of payback if the policy lapses? Do most agents tend to then maintain an "emergency" fund for instances such as this? I would assume careful cultivation of the crop (client base) mitigates this risk but would never completely eradicate it.

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XRAC: So, the renewal commissions (which are variables dependent on the company) are a percentage of the annual premium? For example a 1% renewal commission on a $100,000 annual premium would give you a payout of $1000 every year the policy is renewed? As long as there are no changes to the govt regulations and such? What would you say is the average policy size you experience? Have you/someone captured the numbers on what the average annual policy renewal rate is? Sorry for all the question, I'm just interested in the numbers game of the industry.

The smart ones have a slush fund for those policies that chargeback. Having said that chargebacks very quite a bit based on the market you work and how you sell the policy. If your not slamming people into policies they can not afford and they value the coverage it is a small issue.
 
When dealing with advances, most agents will spend the money as soon as they get it for bills or whatever reason. With advance commissions, we recommend our agents open a separate bank account and hold a reserve account of 10% with a cap of say $2,000 (you can determine your own cap). Regardless of how clean the business you write, you will always have lapses some for reasons you cannot control. It's very difficult to come up with money to pay back your debit balance when you have already spent it.
 
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