Advance and Earned Commissions
Advance Commissions are a Privilege not a Right Under the Contract
The Company retains the right to extend the option of receiving commission advances to the Member at The Company’s sole discretion. The Company may extend one of three options that the Member may at his/her sole discretion decide to accept or not. Those options are;
- Pay as earned as defined in this agreement.
- Pay an advance on commission when the policy is issued.
- Pay an advance upon submission.
- Pay on some combination of the above.
- The Company reserves the right to withdraw a Members right to an advance at its sole discretion for any reason at any time.
- The Member has the right to accept the advance payments offered by The Company or simply take commissions as they are earned.
- All advance programs ae based on product provider contracts which may change from time-to-time.
- Default payment option will be as earned if The Company does not offer an advance option or if the Member fails to make an election to receive the advance.
Advance as a Loan
When a policy advances, the Member will have an Advance Balance. This is the amount of the advance payment and must be repaid by the Member. It is repaid using the earned payouts a member receives when a client makes a monthly premium payment. The advance recovery is POLICY-based (it may only be repaid from earns paid on the same policy). When the advance balance of the policy reaches zero, the Member is then eligible for future payouts received based on the earns. To further understand this concept, see the following example:
A writing agent receives a $600 advance for a Flex life case that has a 30% advance rate. Following is an outline as to how the advance is recovered and the Member is paid:
|1st Pymt.||$500||$100 (earned amount)|
|2nd Pymt.||$400||$100 (earned amount)|
|3rd Pymt.||$300||$100 (earned amount)|
|4th Pymt.||$200||$100 (earned amount)|
|5th Pymt.||$100||$100 (earned amount)|
|6th Pymt.||$0||$100 (earned amount)|
|7th Pymt.||$100 (earned amount)|
|8th Pymt.||$100 (earned amount)|
|9th Pymt.||$100 (earned amount)|
|10th Pymt.||$100 (earned amount)|
|11th Pymt.||$100 (earned amount)|
|12th Pymt.||$100 (earned amount)|
|Totals after 12 months||$1,200 paid to Member||$0 advance balance – all recovered.||$1,200 recovered amount|
The member receives a total of $1,200.00 for this policy. However, she received $600 up front. The earned payouts are used to re-pay this loan. Once the loan is re-paid, the Member begins to receive the earned payout payment.
Submit Advance Guidelines
The Company has programmed a new persistency tracking into the Client Tracker system. This new program will look weekly at your Base shop business over a 120-day period focusing on the first 90 days of the period. Factors that will be taken into account are how many life policies were submitted to how many policies are either closed, declined for non-medical and those life policies that are still pending after 45 days. Annuities and life policies that are C.O.D. will not be included in the calculation. This persistency program will automatically calculate if a VP Base shop in eligible for Advance on Submission with a 70% cut off.
For policy 1, the advance is $600.00. The following month, the member writes Policy 2 with an advance of $1,000.00. Policy 2 has an earned payout of $200.00. This $200.00 will not be paid toward the $600.00 advance balance of policy 1 in order to accelerate the re-payment period. The advance balance is POLICY SPECIFIC. Therefore, the $200.00 earn will re-pay policy 2 and the $100.00 earn will continue to re-pay policy 1.
An “earn” is a payout that is paid as the client pays an insurance company the premium for a policy.
As a client pays a premium, the Member is paid a percentage of the premium as his/her payout.
If a policy advances a payout upon submission or issue of a policy, the earned payout will be used to recover the advance paid until the advance balance is zero (0).
Types of Earned Payout Cases
There are different types of earned payouts defined as following:
First Year Payouts
First year payouts are those earned in the first year of the life of a policy. They can be one of the following:
Target premium is the maximum payout able premium allowed by the provider company.
Annual Premium is the premium needed for a policy, HOWEVER, there may be a minimum premium needed to keep the policy in force.
Excess Premium – This is the amount a policyholder may pay that is over the Target premium.
These are additional contributions made into a long-term savings product. When an account is opened, the initial investment will be paid at the First Year Payout level. Any additional contribution after that will be paid as an addition.
These are used in insurance products. They are the payout paid based on the monthly premium in the 2nd + policy year(s). They will be paid month to month as long as the policy remains in force.