Renewal Commission

Renewal commission is the ongoing payment you receive each year when your clients' insurance policies renew, typically at a much lower rate than your initial first-year commission.

Think of it as the dividend from your sales work - smaller individual payments that compound over time to create substantial recurring income.

Why does this matter?

Renewal commissions are the foundation of long-term wealth building in insurance sales. While first-year commissions provide immediate income, renewals create the passive income stream that lets experienced agents earn six figures even during slow sales months.

Without a focus on building renewable business, agents remain trapped in a feast-or-famine cycle where they must constantly sell new policies just to maintain their income.

How it works:

When you sell a policy, you receive a high first-year commission (often 50-100% of the annual premium). In subsequent years, as long as the client continues paying premiums, you receive a much smaller renewal commission - typically 2-10% of the annual premium depending on the product type.

You'll encounter renewal commissions across all insurance types, but they're most significant in life insurance, annuities, and disability insurance where policies can remain in force for decades. Property and casualty renewals are typically smaller percentages but can still provide meaningful income over time.

The biggest mistake new agents make is viewing renewals as "small money" and neglecting client service, not realizing that a book of 1,000 policies paying $100 each in renewals generates $100,000 in passive annual income.