Validation Period

AAA

DEFINITION of 'Validation Period'

The amount of time necessary for the premium on an insurance policy to cover the commissions, the cost of investigation, medical exams and other expenses associated with the issuance of the policy. The validation period is the period of time that passes before an insurance product becomes profitable or until the product can start to contribute to surplus.


Also known as the break-even period.

INVESTOPEDIA EXPLAINS 'Validation Period'

The validation period is the time period that an insurer needs to amortize the expenses associated with establishing a life insurance policy. The length of the validation period varies with the policy and the associated costs. The validation period is important because it helps the insurer determine the length of time it takes until that policyholder is profitable for the company.

RELATED TERMS
  1. Amortization

    1. The paying off of debt in regular installments over a period ...
  2. Surplus

    The amount of an asset or resource that exceeds the portion that ...
  3. Death Benefit

    The amount on a life insurance policy or pension that is payable ...
  4. Actuarial Risk

    The risk that the assumptions that actuaries implement into a ...
  5. Life Insurance

    A protection against the loss of income that would result if ...
  6. Elder Law

    Elder law is a legal specialty focusing on the rights and needs ...
Related Articles
  1. A Look At Single-Premium Life Insurance
    Home & Auto

    A Look At Single-Premium Life Insurance

  2. The History Of Insurance In America
    Home & Auto

    The History Of Insurance In America

  3. How Much Life Insurance Should You Carry?
    Insurance

    How Much Life Insurance Should You Carry?

  4. Variable Vs. Variable Universal Life ...
    Retirement

    Variable Vs. Variable Universal Life ...

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center