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
Standards set by the various state regulatory authorities that determine how financial statements must be prepared for regulators. The states are responsible for making certain that ...
Effort of a poor risk to seek insurance coverage. The onset of a health problem such as heart disease, for example, may prompt a person to apply for life insurance before seeking medical ...
Payments in a defined benefit plan. Benefits are allocated to the pension plan participants as premiums are received by the insurance company. Since the benefits purchased are paid up, the ...
Disability in which a wage earner is forever prevented from working because of injury or illness suffered. ...
Court that presides over estate distribution settlements, documentation of wills, and the appointment of legal guardians. ...
Special policy blank issued by an insured for individual shipments or other purposes under an open policy. The open policy allows an insured to buy protection for all marine business for an ...
Calculation of insurance premiums based on an age less than the current age of the insured. ...
Ratio of authorized control level risk-based capital of an insurance company to its total adjusted capital. This statistic determines regulatory action taken by the state's insurance ...
Membership organization of individuals especially trained in the application of property and casualty insurance to personal and business situations. Membership is achieved by passing a ...
Have a question or comment?
We're here to help.