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. Death Benefit

    The amount on a life insurance policy or pension that is payable ...
  3. Surplus

    The amount of an asset or resource that exceeds the portion that ...
  4. Life Insurance

    A protection against the loss of income that would result if ...
  5. Actuarial Risk

    The risk that the assumptions that actuaries implement into a ...
  6. Basket Deductible

    A single deductible that is designed to pay for losses from different ...
Related Articles
  1. Home & Auto

    A Look At Single-Premium Life Insurance

    Want to provide for your dependents and finance your own long-term care? Learn more here.
  2. Home & Auto

    The History Of Insurance In America

    Insurance was a latecomer to the American landscape, largely due to the country's unknown risks.
  3. Insurance

    How Much Life Insurance Should You Carry?

    Learn how much - if any - insurance you really need.
  4. Retirement

    Variable Vs. Variable Universal Life Insurance

    Do you know why you might need one policy versus the other? Read on to find out.
  5. Home & Auto

    Life Insurance Clauses Determine Your Coverage

    Understanding these key parts of your policy will help you to ensure that your family will be covered.
  6. Insurance

    Life Insurance: Putting A Price On Peace Of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
  7. Options & Futures

    What is variable life insurance?

    Variable life insurance is a permanent life insurance policy with an investment component. The policy has a cash value account, which is invested in a number of sub-accounts available in the ...
  8. Fundamental Analysis

    What's a Tangible Asset?

    Tangible assets are property owned by a business that can be touched -- they physically exist. Examples include furniture and fixtures, computer hardware, delivery equipment, leasehold improvements ...
  9. Fundamental Analysis

    Cash Flow From Operating Activities

    Cash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.
  10. Investing

    What Is Hollywood Spending On Oscar Campaigns?

    Here's a look at how much Hollywood is spending this awards season to take home the gold at the 2015 Academy Awards.

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center