Insurance Producer Survivors and Renewal Commissions

Here's a question that pops up from time to time. In fact, we haven't gotten it since...4:30 this afternoon.

Question: If a licensed insurance producer dies and his surviving spouse does not have a producer's license, can she receive his commissions? If so, for how long?

Answer: Yes, she can, and there is no time limit on how long she can receive the commissions on renewals of policies he sold while licensed. The New York Insurance Department addressed this in an opinion dated December 10, 2004:

Nothing in the Insurance Law precludes the widow of a deceased insurance agent, acting as administrator of his estate, from selling her deceased husband’s insurance business and receiving a percentage of the commissions the agent who purchases the business may earn from subsequent renewals of policies originally transacted by her deceased husband.

The opinion points out that she cannot receive commissions on new policies sold to her husband's old customers, but she can receive the renewal commissions. In a separate 2002 opinion, the department said that an unlicensed executor of a deceased agent's estate may receive future commissions based on business the agent sold during his lifetime.

This should give producers some peace of mind that their survivors will have an income stream from their commissions after they're gone.

Leave a Comment

Comments

[Auto Insurance]

Yes the survivor will get the commission after the death of the insurance producer. Good answer.

[Dar Novak]

Tim, Everyone should have his or her affairs in order because one never knows..... I worked for a small agency and the owner had no continuation plan in place - much less a corporation owned life policy that would have given me or the corporation the funds to buy out the other stockholders when he passed away in the late 70s. I had kept after him to at least let me take out the policy on him but he refused. Upon his death it was (to say the least) nasty and depressing. A 'forced sale' was extremely unpleasant and nobody received significant worth. A sad tale.

[Tim Dodge]

Dar,
The best illustration is always provided by someone who's been there. Thanks for sharing your story.

[Bill Collins]

My agency is incorporated and I and I own all of the voting stock. The Corporation would pass to my heirs according to my will. All agency staff are fully licensed but none of them are licensed on the agency license,rather they are licensed with companies. I hold both a Pc license and a brokers license.

I assume the Corporation can continue to operate at my passing and receive commissions. My wife, if she succeeds me should be able to be employed by the agency and receive a salary. Any comment on the above would be appreciated. Three of my son's are attorney's I could ask them and I will but would be interested in your opinion

[Tim Dodge]

Bill,
Under New York law, your survivors can receive commissions from renewals of policies you sold while you were alive and licensed. They would not be able to receive commissions on related new business (additional policies sold to those clients) unless they hold licenses. To be a sublicensee on a corporate license, the person must be either a director or an officer of the corporation. If your wife or one of the employees was to succeed you as president of the corporation, that person could be come a sublicensee. A corporation can list more than one sublicensee, so it's not an either/or proposition.

Please let me know if you need more information.

[Sandy]

Can commissions be collected and distributed to heirs of an agent that died 30 years ago? My fathers will and subsequent trust stated that his rights to commissions were to be sent to the trust. It seems the trust dropped the ball and never followed through in collecting the commissions. Any insight or ideas on next steps would be much appreciated. Thanks.

[MIA Insurance]

Followup to prior query about surviving agent receiving deceased agent unclaimed commissions: It should be noted that the deceased agents death certificate was provided to remaining agent after resident state determined and acknowledged the surviving agent had a viable relationship to the deceased agent.

[sherri]

How long should you keep E & O insurance on a deceased agent who was a sole-proprietor? Once his estate is allocated to the beneficiaries is there any need for the E & O?

[JoAnn]

How do I notify the companies where commissions come from? Addresses?idt

[Jak]

Is there a way to see if an estate representative is receiving commissions from a deceased agent?

[Tim Dodge]

Sherri - Your question is better directed to an estate attorney. I honestly don't know whether legal actions can be taken against an estate that has settled. If it cannot, then there probably is no need for continued E&O coverage.

JoAnn - I recommend notifying the marketing department of every carrier for whom the deceased was an appointed agent.

Jak - I'm not aware of any way to get this information.

[John Kuehnle]

In the above scenario - the agent dies and his widow is able to continue collecting renewal commissions - what is the best business organization to ensure this? I am currently Sole Proprietor, but am considering setting up an LLC so as to facilitate continuation of commissions.
Can anyone advise?

[Tim Dodge]

John - that question is probably best directed to a qualified financial adviser. I know that an LLC provides liability protections and possibly some tax advantages, but I'm by no means an expert.

[THALIA MOSHAKOS]

My husband passed a year and half. I am unlicensed . Can I get the commission from renewals? Do I have to report it to the NEW YORK INS.DEPT.
Thank you
Thalia

[THALIA MOSHAKOS]

I am the solo president of my husband's business, how han I become a sublicensed.
thanks
thalia

[Tim Dodge]

Thalia, I'm sorry for your loss. It is legal for you to receive commissions from renewals of policies that your husband sold while he held a valid license. I am not aware of anything in the New York Insurance Law that would require you to report receipt of the commissions to the New York State Department of Financial Services.

[Tim Dodge]

Thalia, In order to become a sub-licensee on the agency's license, you must be qualified to hold an individual license (you don't necessarily have to obtain an individual license, but you must meet the qualifications.) New York insurance law requires agents and brokers to take a 90 hour pre-licensing education course and pass a licensing exam. Once that is done, complete and submit the form at http://www.dfs.ny.gov/insurance/licensing/applications/pcosupps.pdf to the NYSDFS.

[Linda Brian]

I noticed that all of these answers pertain to New York laws and are quite old. Does the same pertain to widows in CA? And updated to 2020?

[Tim Dodge]

Unfortunately, my expertise is New York licensing law. I'm not familiar with the requirements in California.

[Andrea L Lefebvre]

Hi,

Is it still th case that surviving spouse of a producer can receive the commissions from policies sold while producer is living? Is there no time limit applied?

If there is no spouse, can the children receive the commissions?

Andrea

[Tim Dodge]

Andrea, nothing has changed in New York insurance law that would change my answer. Unlicensed survivors of the deceased producer may receive commissions from the renewals of policies he or she wrote while licensed, but they may not receive commissions from any new business sold to those customers. There is no time limit.