How to Figure Out Your Commissions.

Figuring out what you get paid on a policy can sometimes feel confusing. But with a little practice you can know what you are getting paid week after week on your new business.

In order to figure out your commission check, you need to know three things...

• Annual premium of policy sold (Monthly premium x 12 months= Annual Premium or A.P.)
• Commission level 
• Commission advance (Usually 75% or 9 months)

Step One:
Multiply your annual premium by your commission level. For example, if you are on a 95% commission level and you sold a policy for $50/mo, you would figure the following:

$50 x 12 months=$600 AP
$600 x .95 (95%) = $570 total commission

Step Two:
Now that you know your total commission for the policy, you need to figure your advance commission. The advance commission is what the insurance company is willing to pay you in good faith that your sold policy is going to stay active. Most companies pay at 75% advance but 25%, 50% and 'as earned' (no advance/month by month) options are also available. Let take a look at our example.

$570 x .75 (75% advance) = $427.50
$427.50 is the amount that will be deposited into your account on pay day.

So where did the rest of your commission go? Don't worry! You still get paid but it comes a little later. The remainder of your commission ($142.50 or the 25% not advanced) usually is paid at month 10,11,12 of the policy year. Here is the break down for our example.

$427.50 advanced on payday (75% of total commission)
$47.50 paid on month 10
$47.50 paid on month 11
$47.50 paid on month 12
Total commission for your sold policy is $570

Here is a list of things that could effect your commission payout:

• Charge backs: If you have policies you were advanced on but didn't 'stick on the books' long enough to balance out your advanced commission, the insurance company will use your incoming commission to pay off the debit balance of the lapsed policy BEFORE you get paid any new commission. For example, if you owe $100 on a policy that was charged back and your next commission check should be $500 from new business written... your pay check will be $400 ($500 commission - $100 chargeback = $400 net commission)

• Policy fees: Some companies pay on policy fees and others don't. They usually range from $36-$42 per year.
• Lead debt: If you owe your agency or insurance company money for leads they fronted you, plan on having a percentage of your check taken to repay their investment in you. Most agencies withhold lead debt at 35%, 50% or 100% depending on your agreement.
• Policy type: Companies don't pay equally on all policies sold. For example, if you sell a policy that is graded or to somebody who is over 81 years old... chances are you will experience a decrease in your commission for that policy.