Vested: What does it mean as an Insurance agent?

Being vested from day one means you won’t have to count down the months until you have 100% commission ownership. The term “vested” is often used in describing employer-sponsored retirement plans and how many years it takes for the employee to retain ownership.

However, for insurance agents, Captive or Independent, vesting means something different and is incredibly important from day one. 

Wikipedia defines vesting as the point in time when the rights and interests arising from legal ownership of a property are acquired by some person. 

To become vested means the process of accruing rights of ownership. The rights are usually earned through time spent in employment, and are defined by a schedule. Employers use vesting schedules as an incentive program to reward loyal employees who remain with the company for a long period.

What does vested mean for Insurance agents??

When you are a Captive insurance agent, your commission rate may be negotiable upon starting at that agency and there may be incentives to grow your commission rate over time. Regardless, your commission (which may be based on your production) gets paid out directly from the carriers to a “middleman” – your agency, in which they take their cut to cover overhead and lead generation, and then pay you the agreed upon rate. Over time, the longer you are with the agency, the higher your commission rate will become on 1st year’s commission. As for the residual commission that is paid in year 2, 4, 7, and so on, depending on the carrier and product, may not be paid until you have been with the agency for a specified period of time (varies by agency). Having the full capabilities of owning your book of business and collecting all the commissions due, including residuals, makes you fully vested. Overall, the longer it takes for you to earn the full commission available, the longer the vesting period is. Being a captive or non-captive agent does not fully define your vesting schedule. 

As an Independent insurance agent, you may encounter stipulations and not be fully vested until you work with the company for a specified period of time. However, there are agencies out there, like Pivotal Insurance, that enable independent, non-captive agents to be paid directly by the carriers, including residual commission immediately.  The independent agent is not employed by an agency and is paid directly by the carriers. The Agent’s upline will not capture any commission from the Agent aside from the override that is paid directly by the carriers to the upline. In that scenario, because all of the commission agreed upon is paid directly to the agent by the carrier, you are considered vested immediately- meaning your book of business, your clients, and the lion’s share of the commission does not belong to the agency. Instead, they are yours from day one.

What happens if you leave the agency?

For Captive agents, generally, there are stipulations if you leave your agency that prohibit you from working directly with “your clients” because, well, they are not your clients… They are proprietary property of the agency. Your book of business (also known as client list) that you cultivated relationships with, nurtured, and fostered over the years, stays with the agency when you leave. 

Quick tip: Be careful when entering an agreement with any agency as a Captive agent and confirm that you will be able to take your clients with you if you decide to leave. Although there may not be a reason to write a new life insurance policy for those clients, you can always add on to their policy and maintain the relationship for referral business if you have access to their contact information once you leave the agency. Side note- in order to replace a policy for your customer with a new carrier, the Agent must be mindful of “twisting” and be able to prove suitability in order to honor the code of ethics, state regulation and FINRA (Financial Industry Regulatory Authority) rules and regulations.

If you’d like to join a non-captive agency and be vested from day one or to learn more, reach out! 561-412-5500 or andy@insuranceispivotal.com.

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About Pivotal Life Insurance

Pivotal Life Insurance is a family owned, independent insurance agency that focuses on income protection and family security through Life Insurance products (Term Life, Whole Life, Final Expense), Mortgage Protection and Annuities. With a range of product offerings, we accommodate the varying needs of our clients through resources provided by the nation’s top rated carriers. Although we are headquartered in South Florida with a branch in Maryland, we service most of the United States as our agents are licensed throughout the country. Pivotal Life Insurance is one of the fastest-growing agencies and we pride ourselves in putting you, our customers, first.

Insurance Is Pivotal. Cherish what’s important.

For more information or if you’d like to join the Pivotal family, visit www.insuranceispivotal.com or call at 561-412-5500.