LTV (Lifetime Value)
The total expected commission (FYC + renewals) from a policy or client over the full duration of the relationship.
Full Definition
Lifetime Value (LTV) is the total expected commission from a policy over its full in-force duration, discounted for time-value-of-money and persistency probability. For a typical Final Expense policy: $500 FYC + (7% × $800 × 6 years) = $836 LTV at 100% persistency, ~$620 LTV at realistic persistency. For a Medicare MA-PD at the 2025 caps: $611 FYC + $306/year × 6-year average tenure = $2,447 LTV at 100% persistency. LTV is the correct denominator to compare against CPA: LTV/CPA > 3.0 is a healthy unit economics ratio; 2.0–3.0 is marginal; below 2.0 is unsustainable long-term. Agencies optimizing for LTV (not FYC) invest in persistency-boosting onboarding and ancillary cross-sell.
Example
An ACA agent's CPA is $220 per enrolled household. Average household stays 2.8 years at $22 PMPM carrier commission = $739 LTV. LTV/CPA = 3.4 — a healthy unit economic.
Related Terms
- CPA (Cost Per Acquisition) — Total lead spend divided by policies written — the true per-customer acquisition cost, factoring in contact and close rates.
- 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.
- 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.
- 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.
- Book Value — The estimated current-market sale price of an agent's book of business, commonly expressed as a multiple of annualized renewal commissions.