Life, long term care, disability, and annuity news.

Annualization Requirements

10 Dec 2019 » Reid_Tattersall

Annualization (aka annualized commissions) is where the agent receives commission for unearned premium. For example, let’s say an agent sells a policy with a $100/month premium and has an 80% commission percentage. The agent would receive $1,200 (the annualized premium) * 80% = $960 of commission once the policy goes inforce opposed to earning $100 * 80% = $80/month for 12 months. The total commission is the same, but the commission is received sooner when the premium mode is other than annual.

Annualization can provide assistance with cash flow, especially for new agents who don’t have an existing stream of commission.

The major concern with annualization is chargebacks. When a policy lapses, the insurance company has paid out more than it earned so it requests immediate payment for the debit balance from the agent. Insurance companies have been taken advantage of by agents who have not paid their debit balance and hence screen agents or don’t offer annualization altogether. The general agency (i.e. BackNine), can be held liable for an agent’s unreimbursed chargebacks and hence can have their own requirements (see BackNine’s Requirements below). Annualization is rarely uncapped. For example, a maximum that can be annualized per case (e.g. 75% of the first year premium or $5,000) or in total (e.g. $30,000) is set to limit risk.

Annualization is more common with insurance companies with a career agent system (e.g. New York Life) as the agent sells the majority of their business with their career carrier which give the insurance carrier a better chance of collecting against debit balances. For example, the insurance carrier can offset debit balances by commissions earned on other policies. With brokerage insurance carriers, it’s more common for agents to sell one policy and move to a new carrier which limits their ability to collect on a debit balance.


  • The insurance carrier must support annualized commissions for the written product. Around 50% of life insurance carriers offer annualization. View the carrier within BOSS to determine if they support annualization.
  • The insurance carrier must approve you for annualization. Agents terminated for cause or with poor financial history are unlikely to be approved.
  • The agent must meet one of the following: an active CLU, CFP, ChFC, CAP, LUTCF, FSCP, RIPC, WMCP, ChSNC, or CLF designation, a securities license registered with a broker-dealer or RIA, 5 active policies with BackNine, or a credit score above 720.


If you’re approved for annualization, you’ll see annualization marked on your profile within BOSS. Not every carrier supports annualization so you can also check the annualized status of your appointments within BOSS.

Call us at (800) 790-1951 or email your marketing manager with questions.

Reid ✌️