When you write a policy, you usually don't wait a year to get paid. The carrier advances you a portion of the first-year commission up front — commonly nine months of it — and earns it back month by month as the client pays.
That advance is a loan. If the client stops paying in month four, the carrier takes back the five months you were paid for and didn't earn. That's a chargeback, and it comes out of your next commission run whether or not you have one.
The math, once
Write a policy at $100 a month with a 75% contract level and a nine-month advance:
| Item | Amount | | --- | --- | | Annualized premium | $1,200 | | Commission at 75% | $900 | | Advanced (9 of 12 months) | $675 | | Client lapses month 4 | — | | Earned | $300 | | Charged back | $375 |
Nothing went wrong in that sale. The client just stopped paying. You are now $375 in the hole against a policy you were congratulated for writing.
Why persistency is the only number that matters
Persistency is the percentage of your business still paying after a given period, usually thirteen months. An agent writing $30,000 a month at 50% persistency makes less than an agent writing $18,000 at 85%, and the second agent keeps their contract.
Production gets you attention. Persistency gets you a career.
Carriers watch it. IMOs watch it. Below a threshold you lose the advance, then the contract.
What actually moves it
- Draft date. Match it to when they get paid. Most lapses are timing, not affordability.
- Sell the payment they'll still make in month nine, not the one they can barely make today.
- Call after the first draft clears. The single highest-return call in the business, and almost nobody makes it.
- Be honest in field underwriting. A policy that gets rescinded was never income.
Next: what an IMO takes from your contract.
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