Life Insurance Leads and Chargebacks, Explained

Nobody explains these words until the bill arrives. Here they are in one plain sentence each. They are trade terms, not legal terms, and contracts differ, so the contract you sign decides.

It depends, and nobody can promise you a return. The price of a lead is certain. The sale is not.

Bought leads can turn out to be old, recycled or shared, and the bill can grow faster than the sales. Buying leads before you have learned how to close adds to that risk.

Leads can make sense for an agent who already knows how to close, can afford a loss and has the terms in writing. They are a poor bet for a new agent who has not learned the work yet. Who fronts the money matters too. Your own cash, an advance from your upline and a loan you repay from commission are three different risks.

Track these in your own records, so you do not have to guess:

• How many leads you bought and what they cost in total.
• How many people answered.
• How many set an appointment.
• How many applications you wrote and how many policies were issued.
• How many are still in force months later.
• What was left after any chargebacks.

Here is the shape of it, in words and with no dollar amounts. You write a policy. The carrier pays an advance, which is a large part of the commission up front, before the client has paid for the full year. The client pays for a few months, then the bank draft fails and the policy lapses. The carrier earned only part of what it advanced, so it takes the rest back. That is a chargeback.

If you have other policies paying commission, the carrier may net the chargeback out of those payments. If you do not, the amount becomes a debit balance that you owe. A new agent with few policies in force has the smallest cushion, which is why chargebacks can hurt new agents most.

Roll-ups are the part that surprises people. In some contracts, a debit balance that is not repaid passes up to the upline or the organization. That can mean someone above you owes money for your sales. If you build a team, it can mean you owe money for theirs. Ask before you sign.

The carrier and your contract with your organization set the chargeback window and what happens to an unpaid balance. Read both.

Most chargebacks start with a policy the client could not keep. These habits help.

• Confirm the client can afford the premium for at least a year.
• Set up a bank draft instead of a manual payment, if the client agrees.
• Call at 30 days to confirm the first draft cleared.
• Keep a reserve, because advances and commissions are earned only while the policy stays in force.
• Choose the carrier by the client's need, not by how fast it pays, and do not stack carriers to chase advances.
• Never replace a policy to earn a commission or an advance.

Get the answers in writing.

• Is it exclusive or shared? Who else gets it?
• How old is it, and where did it come from: a web form, a call, an abandoned cart, an old check lead?
• Can it be resold after I work it?
• Is there a replacement or refund for bad leads, in writing?
• Do I pay up front, or does my upline pay and bill me later?
• If I owe money for leads, is it a loan? Is there interest or a repayment schedule?
• What do I owe if I quit or am released?
• Does anyone above me earn money when I buy leads?
• Am I required to buy leads to stay contracted?
• Does the lead come with the person's consent to be contacted? Federal and state calling and texting rules can apply, including the TCPA and the National Do Not Call Registry.

These work on any organization.

• Does the carrier advance or pay as earned, and on which products?
• How long is the chargeback window?
• How much of the advance comes back if the policy lapses early? Ask for the schedule, not a rule of thumb.
• How are chargebacks collected: netted from future commission, repaid on a schedule, or demanded at once?
• What happens to a debit balance if I leave?
• Can an unpaid balance be reported or sent to collections?
• Do roll-ups apply to me, in either direction?
• Who sets my contract level, and is it written down? Do I get the full commission schedule, not one line of it?
• Who keeps the client?