Can anyone tell me how their life insurance commission works? Is it similiar to commissions earned on mutual funds? Is there a residual commission on any life insurance policies sold? If so what is it?
Typically one receives the majority of first year premiums and a lesser amount of trails in subsequent years. The payments indigenous to the product are one issue, while the issue of payment through the firm you're employed at is a different matter. If you're at an insurance based firm doing primarily their policies, the net amounts to you are higher while if you're at a wire house, payments on insurance products will go through the same payout grid as investment products.
Everything that xbanker has told you is correct. Every product is different and your firm plays a role also.
Ex. I sell a product from XYZ Insurance company and a wirehouse rep sells the same product. The premium is $1000. This product pays a 70% commission and a 50% expense reimbursement allowance. It pays no trails.
I get a commission of $700. Additionally, I get a second check for $350 for a total of $1050.
For the wirehouse rep, $700 hits his grid. If he's at 40% on his grid, he makes $280. His broker/dealer probably pockets the ERA.
there CAN be a "trail" on life insurance. normally for an indy this is not the case, but again, it depends on the policy, whether it is term life, disability, long term care, etc.
but unless things have changed recently, insurance agents with say a NML or NYL will get a trail of insurance commissions.
i get 50% up front, 10%/8%/6%/4% the next years and 2% after the 5th year (as long as they keep paying their premium). Because 50% is less than most first year commissions (as you can see from above) my 1st year in the business I get 150% of commissions (so 150% of 50% = 75% FYC instead of 50%), the second year I get 125%, the third year I get 115%, and after that it goes to normal - this helps put food on the table the first couple years.
My company also puts a percentage into a deferred annuity retirement plan that is fully vested after 5 years in the business.
silverstang, you get the bump because it's a NY state style contract. NY limits 1st year commissions.
One thing I would add is long term care and disability insurance pays less than life insurance. At EDJ the commission's are 60% and 50% and then it hits the grid.
LTC and LTD may have a smaller commission but the average case is usually more (exceptions are large permanent life cases).