State RegulationsMI specificDifficulty 3/5
A Michigan producer's license lapses on June 1. In July, the insurer receives renewal premiums on a whole life policy the producer sold and delivered in January while properly licensed; the producer is not currently licensed. May the insurer pay the producer the July renewal commission?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
M.C.L. 500.1240 bars commissions for selling, soliciting, or negotiating insurance by a person who is required to be licensed but is not, but it expressly permits renewal and deferred commissions to be paid if the person was licensed at the time of the sale. The January sale was made while licensed, so the July renewal commission remains payable even though the license has since lapsed.
Why the other options are wrong
- A) The current-license requirement applies to compensation for new sales activity, not to commissions already earned on previously sold business.
- B) Internal consent is irrelevant; what matters is the statutory licensed-at-time-of-sale condition, which is satisfied here.
- C) No 90-day retesting condition governs earned renewal commissions; the examination rule is unrelated to M.C.L. 500.1240's deferred-commission allowance.
Memory hook
Old sales keep paying: licensed when sold means payable when renewed.