The short answer
A contract level is the number that sets how much first-year commission you receive on a policy, usually expressed as a percentage of the policy's target premium. Different organizations offer different levels with the same carrier, because each layer between you and the carrier keeps part of the commission to fund what it provides. A higher number looks better on paper, but lead costs, fees, training, chargebacks, and book ownership often matter more than the level itself.
The number recruiters lead with
Picture two offers on a kitchen table. One promises a higher contract level. The other offers a lower level, but includes training, software, and help with leads.
Most new agents pick the bigger number. Many of them later discover it was the wrong comparison, because the number on the contract was only one part of what each offer actually costs and pays.
That's the most important thing to know about contract levels: they're real, they matter, and they're almost never the whole story.
How contract levels work
Every carrier sets a total amount of commission it's willing to pay on a policy. That total gets split among the layers between the carrier and the agent: the large marketing organization, any IMO or agency below it, and you.
Your contract level is your share, usually written as a percentage of target premium. Two agents selling the exact same policy can hold different levels, depending on which organization they contracted through and their production history. See what is an IMO for how those layers connect.
What target premium means
Target premium is the part of a policy's premium that the carrier pays full commission on. On many term policies, target premium is close to the full first-year premium. On permanent policies, like whole life or indexed universal life, target premium can be well below the total premium, and anything above target usually pays a much smaller commission.
That's why two policies with the same premium can pay very different commissions. When you compare contract levels, ask which products they apply to and how target premium works on each.
Why levels differ
| Reason | What it means |
|---|---|
| Layers above you | Each organization keeps part of the total to fund its operations |
| Production | Many organizations raise levels as you write more business |
| Support provided | Leads, training, and software are often funded from the spread |
| Carrier | Each carrier has its own commission schedule |
| Product | Term, whole life, IUL, and annuities pay differently |
A lower level isn't automatically unfair, and a higher one isn't automatically generous. What matters is what you get, and what you pay, at each level.
What matters more than the number
Advances and chargebacks. Many carriers pay part of the first-year commission upfront as an advance. If the policy cancels early, part of it is taken back. The terms vary, and they can matter more than a few points of contract level. See chargebacks explained.
Your costs. Monthly fees, lead costs, and software all come out of your commission. A higher level with high required costs can leave you with less than a lower level with low costs.
Book ownership and renewals. Renewals are the smaller commissions some policies pay in later years. Whether you keep them if you leave is part of the real value of a contract. See vesting and book ownership.
Support. Training and help with applications affect how many of your policies actually get issued. A policy that never issues pays nothing at any level.
Questions to ask about contract levels
- What is my starting level, and on which products?
- How do I move up, and is that in writing?
- Do levels differ by carrier?
- How are advances and chargebacks handled?
- Who receives my renewals if I leave?
Put the answers in the same table as every other option. The full list of questions is in how to choose an IMO.
Where Ridgewell fits
Ridgewell is a remote, independent insurance agency. Agents work online from anywhere they're licensed, helping homeowners with mortgage protection, mortgage payoff planning, and life insurance, with training, a lead program, and an AI assistant.
Ridgewell costs $99 a month, plus the cost of any leads you choose to buy. You also pay your own licensing and exam fees. Agents are independent contractors paid by commission only. Ask us about contract terms the same way you'd ask anyone else, and see how Ridgewell works for agents.
Where to start
Next time someone quotes you a contract level, ask one follow-up question: "What do I pay, and what do I get, at that level?" The answer tells you far more than the number.
To compare Ridgewell's terms with your other options, watch the free overview.
General information about how commissions are structured in the insurance industry. Contract terms vary by organization, carrier, and product. This is not a statement of any agent's earnings. Agents are independent contractors paid by commission only. Results vary.
