What Is Commission? Definition | Epic Life Glossary

Why it matters

Life insurance commissions are often highest in the first year and lower in renewal years, though products differ. Pay can be reduced by chargebacks if a policy lapses early. Income depends on production, lead costs, and contract level, so no figure is guaranteed. Families do not pay the commission as a separate fee, since it is built into premium.

Source: law.cornell.edu

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Related terms

First-year Commission: First-year commission is the commission paid on premiums collected in the first policy year. It is usually the largest part of life insurance commission on a new sale.
Renewal Commission: Renewal commission is the smaller commission paid in later years while a policy stays in force and the customer keeps paying. Not every product or carrier pays one.
Chargeback: A chargeback is when a carrier takes back part of an agent's commission because a policy lapsed, was canceled, or was rescinded within a set period after issue.
Contract Level: A contract level is the percentage tier of a carrier's commission schedule that an agent is paid. A higher level means a larger share of the premium as commission.
Advance Commission: An advance commission is commission a carrier pays before the customer has paid all the premium it is based on. If the policy ends early, the agent may owe part back.

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