AD Banker Comprehensive Practice Exam

The first year commission for the sale of a Medicare supplement policy may be no more than ________ of the commission paid for selling or servicing the policy in the second year.

1. 50%

2. 500%

3. 100%

4. 200%

The correct answer is: 200%

The correct answer is based on the regulations governing the commissions that agents can receive for selling Medicare supplement policies. It's established that the commission for the first year sale of such policies can be up to 200% of the commission received for servicing the policy in the second year. This structure is in place to encourage agents to sell these policies while also ensuring they remain incentivized to provide ongoing service to policyholders. Understanding this ratio is crucial for insurance agents because it not only affects their income but also impacts how they approach selling Medicare supplement policies. Agents are motivated to maintain a relationship with their clients beyond the first year to ensure that they continue to reinforce the value of the policy and assist clients with any questions or needs that arise. The regulation promotes a balanced approach between initial sales efforts and sustained service, aligning the interests of both the agent and the policyholder. Other options do not reflect the regulatory guidelines established for commissions in this sector, which specifically allow for that 200% ceiling on the first-year commission as it relates to the second year’s commission.