In the world of insurance, term insurance remains one of the most popular and straightforward products for individuals seeking financial protection for their families. While the policyholders benefit from its low premiums and high coverage, insurance agents play a vital role in promoting and selling these policies. One of the key motivating factors for agents is the commission they earn on sales. As we move into 2025, changes in regulations and market competition have shaped the Term Insurance Agent Commission Chart 2025 in India. This article breaks down the details.
What is Term Insurance?
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Term insurance is a pure life insurance product that provides coverage for a specified term. In the event of the policyholder’s death during the policy term, the nominee receives the death benefit. If the policyholder survives the term, there is usually no payout.
Understanding Agent Commission in Term Insurance:
Insurance agents earn a percentage of the first-year premium and sometimes renewal premiums as their commission. The commission structure is influenced by:
- Type of insurer (Life Insurance Corporation of India [LIC] vs. private insurers)
- Type of policy (term insurance, endowment, ULIPs, etc.)
- Policy term and premium payment mode
- Regulatory limits set by the Insurance Regulatory and Development Authority of India (IRDAI)
IRDAI Commission Guidelines:
As per the latest IRDAI Regulations, 2023, insurance companies have more flexibility to decide commission structures, provided they remain within the overall Expense of Management (EOM) limits.
Key Changes:
- The earlier fixed commission limits have been relaxed.
- Insurers can now design commission structures based on product profitability.
- EOM cap is 30% for life insurance policies (on gross premiums for term and endowment plans).
This framework continues into 2025, with insurers tailoring agent commissions based on their models and sustainability.
Term Insurance Agent Commission Chart 2025:
Here is an illustrative chart based on industry trends and averages as of 2025. Actual rates may vary slightly across insurers. See below term insurance agent commission chart 2025.
| Policy Year | LIC Agent Commission | Private Insurer Commission |
|---|---|---|
| 1st Year | 15% – 25% | 20% – 35% |
| 2nd to 5th Year | 5% – 7.5% | 5% – 10% |
| 6th Year Onward | 2% – 3% | 2% – 5% |
Factors Influencing Term Insurance Agent Commission Chart 2025:
Here are the key factors influencing term insurance agent commission in 2025:
Type of Insurance Provider:
- LIC (Life Insurance Corporation of India): Typically follows more traditional and regulated commission structures.
- Private Insurers: Tend to offer higher and more flexible commissions to stay competitive and attract top agents.
Policy Type and Product Design:
- Pure Term Plans: Offer lower commissions compared to savings/investment-linked products like endowment or ULIPs.
- Return of Premium Term Plans: May offer slightly higher commissions due to increased premiums.
First-Year vs. Renewal Premiums:
- First-Year Commission: Highest payout; often the main source of income for agents.
- Renewal Commissions: Lower percentage, but adds up over time for agents with high persistency.
Premium Payment Term:
- Limited Pay (5/10 years): Might attract better first-year commissions.
- Regular Pay (till age 60 or end of policy term): Ensures renewal commissions over a longer period.
Policy Term and Sum Assured:
- Longer-Term Policies: May offer slightly higher commission rates.
- Higher Sum Assured: Leads to higher premiums, thus higher absolute commission amounts.
Agent Performance and Tier:
Insurers may have performance-based slabs:
- Beginner agents: Standard commission rates.
- Top-performing agents: Eligible for higher commissions, bonuses, or club memberships (e.g., MDRT, COT, TOT).
Distribution Channel:
- Offline/Agency Channel: Full commissions apply.
- Online/Direct Plans: Usually offer little to no commission.
- Bancassurance or Brokers: Shared or fixed commissions.
Persistency Ratio:
Agents with higher persistency (policy renewal) rates often receive:
- Persistency bonuses
- Increased renewal commissions
- Recognition and club benefits
Regulatory Guidelines:
Since the 2023 IRDAI regulation changes, insurers have more flexibility, but must manage expenses within prescribed Expense of Management (EOM) limits.
This allows insurers to incentivize agents more strategically, depending on the profitability of the term plan.
Location and Market Competition:
In highly competitive markets (e.g., metros), insurers may offer higher commissions to attract agents. In rural areas, fixed or slightly lower commissions may apply, but there could be additional government-driven incentives.
Mode of Premium Payment:
- Annual Premiums: Generally preferred and may attract higher commissions.
- Monthly/Quarterly Premiums: Slightly lower commissions due to increased administration costs.
Company-Specific Incentives:
Many insurers offer additional perks beyond standard commission:
- Incentive contests
- Foreign trips, gadgets, and cars
- Training sponsorships
- Leadership development programs
Additional Term Insurance Agent Commission Chart 2025 Benefits:
Beyond standard commissions, many agents also receive:
- Renewal bonuses
- Contest-based incentives (trips, gadgets)
- Persistency bonuses (for maintaining low lapse ratios)
- Career progression and club memberships (MDRT, COT, TOT)
Sample Term Insurance Agent Income Projection:
| Monthly Sales | Policies Sold | Avg. Premium | Commission (Est.) |
|---|---|---|---|
| Moderate | 10 policies | ₹12,000 | ₹24,000 – ₹42,000 |
| Aggressive | 20 policies | ₹15,000 | ₹60,000 – ₹1,05,000 |
Conclusion:
In 2025, term insurance continues to offer a stable, though modest, income stream for life insurance agents. The commission rates remain competitive, especially for agents affiliated with private insurers. While term insurance may not yield as high commissions as savings-linked products, its growing demand ensures a steady business for agents who focus on protection-centric selling.
Q. What is the commission for term insurance agents in 2025?
A. The commission varies based on the insurer, but here’s a general range:
- 1st Year: 15% – 35% of the first-year premium
- 2nd–5th Year: 5% – 10%
- 6th Year Onwards: 2% – 5%
LIC agents usually receive slightly lower commissions than private insurers.
Q. Do term insurance policies offer lower commissions than other life insurance plans?
A. Yes. Since term insurance is a pure protection plan with no investment component, premiums are lower, resulting in lower commissions compared to endowment, money-back, or ULIP plans.
Q. Are commissions fixed by the IRDAI?
A. Not exactly. As per IRDAI’s 2023 regulations, insurance companies now have the freedom to structure commissions within an overall Expense of Management (EOM) limit. This gives insurers more flexibility to set agent commissions internally.
Q. Do agents earn commissions on renewal premiums?
A. Yes. Agents continue to earn renewal commissions, though at a lower rate, typically between 2% to 5%, depending on the insurer and policy terms.
Q. Do agents get commission on online term insurance sales?
A. Usually not. Online term insurance plans are sold directly by insurers and often do not involve agents, so no commission is paid.
Q. How is the agent’s income calculated on a term insurance policy?
A. The income is calculated as a percentage of the premium paid by the customer.
Q. Can agents earn bonuses or incentives apart from regular commissions?
A. Yes. Many insurers offer:
- Performance bonuses
- Persistency bonuses
- Club memberships (e.g., MDRT, COT)
- Foreign trips and gadgets
Q. Is there any cap on how much commission an agent can earn in a year?
A. There is no specific cap on the total earnings, but insurers must keep overall payouts within IRDAI’s Expense of Management guidelines.
Q. Do corporate agents and brokers get different commissions than individual agents?
A. Yes. Corporate agents, brokers, and web aggregators often have a different payout structure, sometimes receiving fixed fees or profit-sharing instead of traditional commission percentages.
Q. What happens to the commission if a policy lapses early?
A. If a policy lapses (e.g., the client stops paying premiums), the agent:
- May lose out on renewal commissions
- Might not qualify for performance or persistency bonuses
Hence, maintaining good client service and follow-up is crucial for agents.