Life insurance commission schedules explained: target premium, excess, and the renewal tail

The headline percentage is not the offer

Life commission schedules are built from several parts: a first-year percentage, the premium basis that percentage applies to, an excess-premium rate, a renewal percentage, the number of renewal years, and any service or trail amount after that. A schedule that leads with a high first-year number can still pay less over ten years than a quieter one with a longer renewal tail.

Read the basis first. On universal life and indexed universal life, full commission normally applies only up to target premium; premium above that is paid at a much smaller excess rate. Two agents writing identical cases can be paid very differently depending on how much of the premium the carrier treats as excess.

What to ask for in writing before you contract

Get the numbers on paper and get the definitions with them:

• First-year percentage and exactly which premium it applies to
• Excess premium rate, and how target premium is determined for each product
• Renewal percentage by policy year, and the final renewal year
• Service or trail rate after renewals end, and whether it requires persistency
• Chargeback window — how long, and whether it is full or pro-rated
• Whether the schedule differs by product, age band, or distribution channel

Why the schedule matters after you sign

The schedule is also your audit baseline. You cannot tell whether a statement is right if the contracted percentage lives in someone's memory instead of in a record you can compare against.

Enter each carrier's rates once — including the renewal step-down and the year it starts — and every future statement is checked against the agreement rather than against last month's deposit.