If a policy is cancelled before the term has expired, what happens to the commission?

When a policy is cancelled before the term has expired, the typical process involves the return of a portion of the commission to the insurer. This is due to the fact that commissions are often based on the premiums paid for the policy's duration. If the policy is terminated early, the insurance company will generally seek to recover some of that commission from the agent, reflecting the fact that the coverage was not in force for the entire term. Thus, the correct response indicates that part of the commission must be returned to the insured, aligning with common industry practices regarding early policy cancellations.

In contrast, the notion that the entire commission would be retained by the insurance company does not account for the policies regarding refunds and commissions that govern such situations. Similarly, ideas like donating the commission to charity or holding it until renewal do not align with standard procedures in insurance commission management related to early policy cancellations.