[New Agent] Handling Chargebacks

[myinsurebiz]

So I’ve seen that the general advice is to put 20% of your commissions into a separate account to budget for chargebacks.

My plan:

I transfer 20% of my commissions into a savings account at the end of every month. I adjust the amount in the account on a quarterly basis so it equals 20% of my quarterly commissions.

Example: total commission from Jan-March was $50K and I have a balance of $10K in the account; no adjustment needed. Commission from Apr-June was $100k and now I have a balance of $30K in the account ($10K from end of Q1 and $20K from Q2). Since 20% of my most recent quarter is $20K I take $10K out as a bonus to myself.

My thoughts behind this: I’ll know when I have “too much” in my chargeback reserve and can adjust quarterly. This way I won’t have funds sitting in the account that don’t really need to be there (which would happen if I just put away 20% each month and never adjusted it).

Does this seem like a viable strategy?

Take just a 6 month advance and that is an excellent strategy . . .

 

[Todd King]

How do you do that with automatic annualized commissions?

If the client pays annually, you have still "earned" the commission....therefore, still as earned.

I know, still a chance for a chargeback in this case though.