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.
Full Definition
Renewal (or residual) commissions are commissions paid in the second and subsequent policy years as long as the policy remains in force and premiums are paid. Typical renewal rates: Final Expense whole life 5–10% years 2–10; mid-market whole life 5–10% years 2–10; Medicare MA-PD ~$306/year CMS-capped in 2025 (the 2026 national rate is $347); Medigap 20–25% years 2–6, declining thereafter; ACA continues carrier PMPM as long as the consumer remains enrolled with the carrier; annuity typically no renewal (single-premium nature). Renewal income compounds: an agent in year 5 of consistent Medicare writing receives renewals from five annual cohorts simultaneously. Renewal income is the primary reason persistency matters more than FYC alone.
Example
A Medicare agent writing 80 MA-PD enrollments per year for 6 years carries ~480 policies at year 6. At the 2025 rate of $306/year renewal × 480 policies (assuming 100% persistency) = $147K/year renewal income, on top of current-year FYC.
Related Terms
- 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.
- 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.
- Chargeback — Carrier reversal of previously paid commission when a policy lapses, is cancelled, or is replaced before the commission protection window ends.
- LTV (Lifetime Value) — The total expected commission (FYC + renewals) from a policy or client over the full duration of the relationship.
- Book Value — The estimated current-market sale price of an agent's book of business, commonly expressed as a multiple of annualized renewal commissions.