Rebate Information
Proposition 103, passed by the California legislature on November 8, 1988 made it legal for California insurance agents to rebate a portion of their commissions to clients who purchased insurance from them in the state of California. California, along with the state of Florida are the only two states currently allowing agents to do this.
For residents of states other than California, you can enjoy the benefits of a rebate if you meet the two following criteria: one, you must purchase your insurance plan from a licensed agent in the state of California ; two, when you apply for the insurance, you must meet and complete the application with the agent physically in the state of California.
Discount Insurance and Financial Services can offer most any life, annuity or long term care plan on a cheaper basis by virtue of marketing our services online. This process substantially reduces our business costs and allows us to pass on those substantial savings to our clients.
Receiving Your Rebate
After your policy is issued, you will pay the first premium directly to the insurance company. The policy is delivered to you and a “free look” period of 10 to 30 days begins (depending on the company and the state). During this period you will have time to review your policy and its provisions. Should you choose not to accept your policy for any reason, you may return it for a full money back guarantee. All premiums paid will be returned to you by the issuing insurance company.
Should you choose to keep your policy in force, within three to four weeks a commission check will be sent to us by the insurance company. After allowing another week for processing, a rebate check will mailed to you.
You will receive a 1099-MISC form at the end of the year. The amount rebated to you should be received on a tax free basis. It is usually considered a return of unused premiums much in the same category as an insurance policy cash dividend return. This is our current understanding of the tax treatment of rebated commissions. In no way does Discount Insurance & Annuity Services, LLC offer legal or tax advice. You should consult your own account or tax attorney on the taxable status of the rebated funds you will receive.
Rebate amounts and Sample case:
For example, if Mr. and Mrs. Client purchased a $5,000,0000 life insurance policy for the purpose of paying estate taxes. Their annual premium is $225,000 each year. The first year commission, assuming an average commission rate of 80%, to the agent is $180,000 (commission rates vary from company to company). After the case is issued, paid for and put in force, they will receive a $90,000 rebate in the first year.
Rebate Agreement
Rebate will be received only after the 30 day free period and the policy is placed in force.
Client will received IRS 1099-MISC form for the amount of the rebate for the year in which the rebate was received.
Discount Insurance and Annuity services, LLC offers no legal or tax advice as to rebates received.
In the event the policy is cancelled or lapsed in the first two years, there may be a charge back of all or a portion of the commissions paid to NFIAS, LLC. In this event, the client agrees to return all rebated monies to NFIAS, LLC. Failure to do so within 30 days will trigger legal action. The client will be held responsible for the full amount rebated and any legal fees or costs NFIAS, LLC incurs to properly recover these funds.