LIC Agent Commission Structure: What Your Agent Earns on Each Policy

Several of my clients have asked me directly how LIC agents earn their commission and whether this creates a conflict of interest when recommending policies. I believe in transparency, so let me explain exactly how agent commissions work in LIC.

**Why understanding commissions matters to you**

When an agent recommends a policy, they earn a percentage of the premium as commission. If an agent recommends a more expensive policy when a cheaper one would serve you better, understanding the commission structure helps you ask the right questions.

I should clarify upfront: I earn commission on the policies I sell. My commitment to recommending the right policy regardless of commission level is the foundation of my 31 years in this profession. But you deserve to understand the structure.

**How LIC commission is structured**

LIC agents earn what is called a First Year Commission on the first year's premium, followed by a lower Renewal Commission on subsequent years' premiums. There is also a Bonus Commission for high-performing agents.

First Year Commission rates vary by product category: - Term plans (pure risk): approximately 35% of first year premium - Endowment and money-back plans: approximately 35% of first year premium - Whole life plans: approximately 35% of first year premium - Single premium plans: approximately 2% of the single premium

Renewal commissions are much lower — typically 7.5% for years 2 and 3, and 5% from year 4 onwards.

**What this means for you**

Because first year commission is the same percentage across most plan types, an agent does not earn more by recommending an endowment plan over a term plan (for the same premium amount). However, since endowment premiums are much higher than term premiums for the same Sum Assured, the absolute commission is higher on endowment plans.

Example: A Rs 1 crore term plan for a 35-year-old costs approximately Rs 15,000 per year. A Rs 1 crore endowment plan at the same age costs approximately Rs 4.5 lakh per year. Agent commission on the term plan: Rs 5,250 first year. On the endowment plan: Rs 1.57 lakh first year.

This is why some agents push traditional savings plans over term plans. Being aware of this helps you ask: is this recommendation in my interest or the agent's interest?

**How I navigate this**

I always show clients the term plan option first. If they need only life cover, I recommend a term plan, even though the absolute commission is much lower. My business is built on referrals from satisfied clients — that long-term relationship is worth more than any single commission.

**MDRT and commission thresholds**

Million Dollar Round Table (MDRT) recognition requires agents to meet minimum commission or premium thresholds. Some agents chase MDRT by pushing policies to meet quotas. My MDRT qualification comes from genuinely serving my client base in Gorakhpur — not from volume selling.

If you ever want to understand exactly what commission I earn on a policy I recommend to you, ask me directly. I will tell you.