Safety Margin

Updated: 29 February 2024

What Does Safety Margin Mean?

A safety margin is the number of sales or amount of gains required to cover expenses, or to "break even." However, it can also refer to an increase in mortality rates above the expected rates for life insurance or a decrease in mortality rates below those that are expected for any annuities that a life insurance company is offering.

Insuranceopedia Explains Safety Margin

Essentially a safety margin is a number that an insurance company must reach to be "safe" for a particular risk. If the insurance company reaches this margin, then it knows that it will have the finances available to fund all of its expenses. If money is made in excess of the safety margin, then most likely it will turn into profit. This is unless expenses end up being higher than they were projected to be.

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