Commission true-up

What it means

Estimates are everywhere in an agency’s commission: deposit premium on an auditable policy, an expected rate before the schedule is confirmed, an accrued profit-sharing figure before the carrier’s worksheet arrives. A true-up is the moment the estimate meets the final number. The IRS describes the same mechanism for income in Publication 538: “If you include a reasonably estimated amount in gross income and later determine the exact amount is different, take the difference into account in the tax year you make that determination.”

How it works: the carrier, or your own books, compares what was paid on the estimate with what is due on the final figure and posts the difference. On a premium audit it is additional or return premium with commission at the policy’s rate; on a contingent commission it may be a final payment after an advance.

How it shows on a commission statement

A true-up line usually carries a code such as AUD, ADJ or a description like “prior period adjustment,” and may refer to a policy term that ended months ago. The check: the true-up should equal the commission on the final figure minus the commission already paid, at the rate originally applied.

In reconciliation, and what Lapidar does

Lapidar does not track estimates over time. It checks each statement line against your book premium times the schedule rate for that carrier, line and new or renewal business. A true-up line on a policy is added to that policy’s payments on the statement and compared with what your book says is due, so update the book premium after an audit. Negative true-ups are treated as chargebacks and paired with an earlier payment where one exists.

Example

Audit true-up on a general liability policy · EX-80533Example data

Deposit premium at issue

$6,000.00

Commission paid at issue, 12%

$720.00

Audited premium

$7,400.00

Commission due on audited premium, 12%

$888.00

True-up owed to the agency

$168.00

Common mistakes to check

• Not updating the policy premium after an audit, so the true-up looks like an overpayment.
• Accepting a true-up at a different rate than the original commission.
• Booking an estimated bonus as final and never comparing it with the carrier’s worksheet.

Questions

What does true-up mean in insurance commission?

Settling the difference between commission paid on an estimate and commission due on the final figure, such as audited premium or a final bonus calculation.

Can a true-up reduce my commission?

Yes. If the final premium is lower than the estimate, the true-up is negative and works like a chargeback at the original rate.

How is a commission true-up calculated?

Commission on the final figure minus commission already paid. In the example, 12% of $7,400.00 is $888.00; $720.00 was paid, so $168.00 is owed.

Sources

• Internal Revenue Service, Publication 538, Accounting Periods and Methods. Retrieved October 14, 2026.

Lapidar is commission reconciliation software for independent insurance agencies, in its founding pilot. Related: audit premium.