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
Background information used in life and health insurance underwriting to ascertain the probability of hereditary disease. The purpose is to determine if the disease is of such a nature that ...
Theory developed in 1931 by H. W. Heinrich; states that an accident is only one of a series of factors, each of which depends on a previous factor in the following manner: accident causes ...
Option to an insurance company to replace, reconstruct (repair), or reproduce (rebuild) damaged or destroyed property covered by property insurance rather than indemnify an insured in cash. ...
Written form which has precisely the same terms as the other property insurance policies covering a particular property. ...
Total limit on the amount of coverage an insurer will underwrite on an individual risk. The amount underwritten includes the amount to be ceded through a reinsurance agreement. ...
Same as term Debit Insurance: life insurance on which a premium is collected on a weekly, bi-weekly, or monthly basis, usually at the home of a policyholder. The face value of the policy is ...
Same as term Contract Holder: in insurance, individual with rightful possession of an insurance policy, usually the policyowner. ...
Death caused by a person without legal justification. Wrongful death may be the result of negligence, such as when a drunken driver hits and kills someone; or it may be intentional, as when ...
Pension plan format. After deciding how much to contribute, the employer can suspend, reduce, or discontinue contributions during the first 10 years only for reasons of business necessity; ...
Have a question or comment?
We're here to help.