FYC (First Year Commission)
The commission an agent receives on a policy's first year of premium — the largest single income event per policy in most insurance lines.
Full Definition
First Year Commission (FYC) is the commission paid on the first year of premium for a newly issued policy. FYC rates are heavily line-dependent: Final Expense whole life 80–115%; mid-market whole life 50–90%; IUL target premium 60–100%+; term life 30–75%; Medicare Advantage CMS-capped ($611 per initial enrollment in 2025); Medigap 20–25% of annual premium; ACA carrier-paid PMPM ($15–$25 per member per month for 12+ months); annuity 3–7% of single premium. FYC is typically paid via one of three schedules: as-earned (monthly as premium is received), 9-month advance (lump sum at issue, chargeback if policy lapses before month 9), or 12-month advance. Advance commissions accelerate cash flow but amplify chargeback risk.
Example
An agent writes a $68/month ($816/year) Final Expense whole life policy at 100% FYC on 9-month advance. At policy issue they receive $612 (9 months × $68), with the remaining $204 paid as-earned months 10–12. If the policy lapses in month 4, months 5–9 are charged back.
Related Terms
- Renewal / Residual Commission — Commission paid in years 2+ of a policy's life — smaller per year than FYC but cumulatively the primary source of long-term agent income.
- Chargeback — Carrier reversal of previously paid commission when a policy lapses, is cancelled, or is replaced before the commission protection window ends.
- Persistency — The percentage of policies that remain in force after a given period (commonly 13-month or 25-month), directly driving renewal income and book value.
- LTV (Lifetime Value) — The total expected commission (FYC + renewals) from a policy or client over the full duration of the relationship.