New Jersey Life Producer Practice Exam

What is the term for the contract that outlines the commissions agreement?

1. Service agreement

2. Retrospective contract

3. Retrocession

4. Commission disclosure

The correct answer is: Retrocession

The correct term for the contract that outlines the commissions agreement is commission disclosure. This contract provides a transparent framework about the commissions to be paid for services rendered, ensuring that all parties understand the financial arrangements involved in the insurance transaction. This is particularly important in the insurance industry, as it promotes ethical standards and protects consumers from potential conflicts of interest by clearly detailing how agents and brokers are compensated. The options involving retrospective contracts or retrocession refer to different contexts and functions. A service agreement typically outlines the provision of services but may not specifically address commission structures. Thus, the most relevant and accurate term in this context is commission disclosure as it directly pertains to the compensation agreement for the services provided by the insurance producer.