So if you have a final expense sales opportunity, should you take commissions on “Advances” or should you go “As Earned?”
Simply put, you should go “As Earned.” No question about it.
But???? Can this be done. Not usually. Not unless you have $50,000 in the bank to get by on for the next 6 months.
So, it’ safe to say, you are going to have to go “Advanced?”
And, what does this mean anyway?
1. As Earned
You get paid as your clients pays their premium. When they pay, the insurance company pays you. This is the safest method because if anyone cancels their insurance, you don’t owe any huge amount of money.
Advance means that the insurance company advances (or loans) you a large part of the first years premium (whatever percent is yours) when the policy is issued? Usually it’s about 75% of the first years premium. I’m not a math guy, so you will have to figure it out.
Well, the advantage of the advance is that it gives you the capital to keep buying leads and you have some money in the bank for other expenses. If you you were on “As earned” you would have to work a very long time before having enough monthly income to support your business. It would take 100 clients paying $50 a month just to get $5000 a month income (this would take about 3-6 months if you are really hustling).
The Downfall is when a super agent goes out there and sells $100,000 in business in six months and then has what’s called: “Charge Back Hell!”
This is what occurs when a handful of clients don’t pay their premiums or cancel on you. The insurance company immediately takes it back from you. So here you are, loving the life of a high roller and then $5,000 in charge-backs hits you in the ass. Ouch!!!
Most agents do not prepare for this and they don’t expect it so they end up faced with debt and no money for the next couple of weeks or so.
This can be really hard in the beginning.
However, it’s not such a bad idea to plan ahead for this and save a little money and we would recommend a few companies that will not hit you hard with charge-backs. They will break it up over time. This is a huge plus because most companies want their money back right away!!!!