What a chargeback actually costs a final expense agency

How a chargeback happens

Many final expense contracts pay an advance: part of the first-year commission up front, before the client has paid for the year. The advance is earned month by month as the client keeps paying. If the policy lapses before it is earned, the carrier takes back the unearned part. That clawback is the chargeback.

For an owner, the cost is rarely one policy. It is every advanced policy across every agent that misses payments in its first months, landing as debits weeks after the sale was celebrated.

Where the risk starts

• A first payment that never drafts because of a wrong bank detail or a changed account.
• A client who did not understand the draft date and cancels at the bank.
• A replacement or a second policy the client did not mean to keep.

The earlier you see a missed payment on an advanced policy, the more options you still have.

What owners can watch

You cannot stop every lapse, but you can stop finding out from a commission statement. Watch the policies still inside their advance window, by agent and by carrier, and act on the first missed payment instead of the third.