Validation Period

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.