Validation Period
Length of time required to amortize the excess expenses of acquiring a given group of life insurance policies. In acquiring a policy, a life insurance company may incur expenses (such as the costs of sales commissions, paperwork, and medical examinations) that are greater than the amount allocated for loading in the first year's premium. In effect, this means new policies are acquired at a loss, forcing insurers to dip into surplus to add the new business. After the first year, because expenses are lower, premiums and their invested earnings begin to generate a contribution to surplus, gradually making up for the excess expense of the first year. The length of the validation period depends on many factors, including the levels of GROSS premiums and expenses, but in some companies validation periods can extend for 10 years or more.
Popular Insurance Terms
Tables used to determine the present value of a sum in the future by taking into consideration the assumed interest rate and time period involved. ...
Coverage under which initial premiums are less than normal for the first few years, then gradually increase for the next several years until they become level for the duration of the policy. ...
Act in which volunteers of nonprofit organizations and government entities do not incur liability if they are acting within the scope of their volunteer activities, their actions do not ...
Coverage against foreign country expropriation underwritten by the overseas private investment corporation (OPIC) for U.S.-owned companies investing in given developing countries. ...
Excuses raised by a defendant in a negligent suit (unintentional tort). There are three basic defenses to unintentional torts or negligence. ASSUMPTION OF RISK an individual (plaintiff), by ...
12-month period from the date of issue of a policy as stated in its declarations section. ...
Quality of investments of insurance companies. State insurance regulators establish rules for company investments. Authorized investments vary, depending on whether a company is a life ...
Amount of required capital that the insurance company must maintain based on the inherent risks in the insurer's operations. These risks include asset depreciation risk, credit receivables ...
Loan under which the owner of a home receives the equity in the form of a series of monthly income payments for life. Upon the owner's death, the lender institution (usually a bank) gains ...
Have a question or comment?
We're here to help.