SmartCommissions - Commission Glossary

The following is a list of commission-related terms used in SmartCommissions. 1035 Exchange

Certain types of insurance policies that meet the requirements of section 1035 of the Internal Revenue Code may be exchanged without incurring tax liability. A policy exchange that meets these requirements is commonly referred to as a "1035 Exchange."

Advisor Payout The commission schedule record that establishes the percentage(s) used to calculate an advisor's commission. These calculations may be in points or percentages.

Annual The amount of premium that would be required if the policy was on an Annual mode.

Annualized A method for calculating a single commission payment based on the amount of premium that covers a twelve-month period, regardless of payment mode.

Annualized First Year Only Same as Annualized, but for the first year only.

As Paid A method of paying commissions as the vendor receives payments from the policyholder.

Base Points The percentage paid on the base commission. The base is calculated by subtracting any fees, the target amount and any conversion amounts from the total premium paid.

Commission Amount A flat rate commission paid by the vendor for a product, regardless of the premium paid.

Commission Schedule A record that establishes the amount and mode of commission paid for each category of premium.

Dump In Points The percentage paid as commission on a lump sum amount that is paid in addition to the premium. The lump sum adds immediate cash value to whole and variable life products.

ERA Points Expense Reimbursement Account (ERA) commission levels. Used in states in which laws cap the amount of base commission that can be paid. ERA commission is typically in addition to the base commission.

Excess Points

The percentage paid as commission on excess premium, calculated by subtracting the fee, target and conversion amounts from the total premium paid. Excess premium can be calculated only if there is a target premium.

Fee Points The percentage paid as commission on the policy fee.

Flat Extra Points The percentage paid as commission on extra premium charged by a vendor for non-standard rated policies.

Lump Sum See Dump In Points.

Modal Premium The total premium to be paid for a policy after modal factor calculations.

Paid Mode The frequency of payment (e.g., annual, monthly, quarterly).

Posting A record of expected commissions, amounts received and payments to agents.

Target Premium The amount of premium set by the vendor as a goal for agents to achieve when selling a particular product.

Tolerance The monetary amount that an agency is willing to write off (i.e., absorb) if a commission payment from a vendor is less than expected.

Trail The amount of commission paid on the investment component of security-type products.