Definition of "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.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Insurance Terms

Bodily or emotional injury resulting from physical or mental wound or shock. A traumatic injury is caused by something outside the person's body as opposed to a sickness or a disease. An ...

Special endorsement to personal automobile policy (pap) covering loss of records, tapes, and other sound equipment caused by an insured peril in an insured automobile. ...

Provision in workers compensation insurance under which an employee who incurs an injury in another state, and elects to come under the law of his home state, will retain coverage under the ...

Employer, association, labor union, or other group ...

Coverage for personal effects of a tourist, including apparel, books, toilet articles, watches, jewelry, luggage, portable typewriters, photographs and photography equipment and supplies. ...

Vesting, deferred or vesting, immediate under which the accrued benefits of the employee increase on a percentage basis (according to years of service and/or attained age) until 100% ...

Rule that provides four requirements for monitoring the independent agent distribution system: The insurance company must be involved in the training of the independent agent. The ...

Portion of a federal law that imposes a penalty excise tax on an excess benefit transaction of 25% of the excess benefit on the person from inside the organization (disqualified person) ...

Largest property and casualty insurance company trade association in the world (international membership)whose objectives include the service of its membership through positive legislation ...

Popular Insurance Questions