Advanced vs as-earned commission
Also called: advance commission, as-earned commission, advanced commission
An advanced commission pays part of a policy's first-year commission upfront, while as-earned commission is paid month by month as the client pays premiums.
Advances improve cash flow for the agent or agency but come with chargeback risk: if the policy lapses before the commission is earned, the carrier takes back the difference.
As-earned commission arrives more slowly but doesn't create debt if a policy ends early.
The mix of advanced and as-earned business changes how much of an agency's income is really earned at any point.
"New agents usually take advanced commission for cash flow, which means watching chargebacks closely."
How do advanced commissions work in life insurance?
The carrier pays part of the first-year commission upfront instead of monthly. If the policy lapses before the commission is earned, the unearned part is charged back. Terms vary by carrier.