The former chairman of the Democratic Party in Kentucky was indicted yesterday on federal charges that he forced a company holding a state insurance contract to share $828,000 in commissions with friends of the party, including Sen. Wendell H. Ford (D-Ky.).

A Ford spokesman referred calls to the senator's brother, Reyburn, who runs a family insurance agency in Kentucky. Reyburn Ford said the firm received two $5,000 checks, in 1975 and 1976, from the agency that held the state's workmen's compensation policies. "Taxes were paid on the money," he said. "And sharing commissions is a normal practice of long standing is a normal practice of long standing in the state." He declined to say what his firm did to earn the fee.

A Justice Department official familiar with the case said only that "the investigation is continuing" when asked if the senator is a target. A Ford spokesman said the senator appeared before a federal grand jury in Lexington Dec. 4 and was told that he was not a target of the inquiry.

The grand jury returned the 22-count indictment against Howard P. (Sonny) Hunt jr., party chairman defrauded the citizens of the state by setting up a secret fund generated by the payment of "excessive" commissions on the state's workmen's compensation insurance policies to the Wombwell Insurance Agency.

Hunt then directed that Wombwell pay "certain individuals who had the Kentucky Democratic Party and its candidates," the indictment said. Besides Ford and his brother, the indictment mentioned several other state party officials and Leslie Brownell Combs II, a wealthy thoroughbred horse breeder. Combs allegedly received $115,000, by far the most on the list.

The indictment specifically charged Hunt with extortion, mail fraud, income tax evasion and conspiracy to defraud the United States. It cited several instances when he reportedly directed other state insurance contractors to kick back tens of thousands of dollars to his son for the purchase of businesses, a car and a Florida condominium.

The indictment was the second in a wide-ranging, two-year-long probe of public corruption in Kentucky that is being directed by attorneys from the Justice Department's public integrity section. The U.S. attorney in Lexington had to recuse himself from the case because his brother was Wendell Ford's local patronage chief while he was governor.

The special grand jury has been investigating the activities of state officials during the term of Ford's successor as governor, Julian M. Carroll. Ford ran for the Senate in 1974, while governor, and defeated Republican incumbent Marlow Cook.

Philip B. Heymann, head of the criminal division at Justice during the Carter administration said recently that he thought the Reagan administration should initiate nationwide investigations of industries prone to extortion and bribery, including insurance and cable television.

A top Republican party leader on Long Island was indicted recently in a similar scheme of alleged insurance-contract kickbacks.

Another Justice official said yesterday that such commission-sharing schemes cost taxpayers considerable amounts in excess fees in some states. But he said it was not easy to determine how widespread the practice is. CAPTION:

Picture, SEN. WENDELL H. FORD . . . brother runs insurance firm