Glossary · Insurance agency commissions
Policy term (policy period)
The policy term, or policy period, is the span of time a policy provides coverage, from its effective date to its expiration date. Personal auto is often written for six months and most other lines for twelve. The term sets when renewal commission is due and how much premium is returned if the policy ends early.
What it means
The NAIC’s glossary of insurance terms defines the policy period as the “time period during which insurance coverage is in effect.” It is printed on the declarations page.
How it works: a policy runs from its effective date to its expiration date. At expiration the carrier renews it for a new term, or the policy ends through nonrenewal or the insured’s choice. A cancellation ends it before the term is over, and the unused part of the term determines the return premium. Allowed terms and notice rules vary by line and state.
How it shows on a commission statement
Each new term usually appears on the statement as a renewal transaction at the renewal commission rate. A six-month policy should produce two renewal lines a year, a twelve-month policy one. A missing renewal line at the expected date is a clear sign to check for unpaid commission.
Example
- Term 1: Jan 1 to Jul 1, premium
- $900.00
- Commission at 10%
- $90.00
- Term 2: Jul 1 to Jan 1, premium
- $960.00
- Commission at 10%
- $96.00
- Expected commission for the year
- $186.00
Commonly confused
- The effective date starts the term; the transaction date is when the carrier processed a change. See effective date vs. transaction date.
- Policies in force counts policies within their terms at a point in time. See policies in force.
- A policy rewrite starts a new policy and term mid-stream. See policy rewrite.
Common mistakes to check
- Expecting one renewal a year on a six-month policy.
- Not checking for a renewal line at each expiration date.
- Figuring return premium on a twelve-month basis for a six-month term.
Questions
How long is a typical insurance policy term?
Twelve months is common for most lines; six months is common for personal auto. Other terms exist, and carriers and states set what is allowed.
Is the policy term the same as the policy period?
Yes. Both mean the time from the effective date to the expiration date, during which coverage is in effect.
Sources
- National Association of Insurance Commissioners, Glossary of Insurance Terms, entry for policy period. Retrieved October 13, 2026.
Lapidar is commission reconciliation software for independent insurance agencies, in its founding pilot. Related: missing renewal commissions.