Validation Period

Published: | Updated: August 1, 2016

Definition - What does Validation Period mean?

The validation period is the length of time that premiums must be paid on an insurance policy so that the expenses associated with that policy are covered by the premiums paid. After the validation period passes, the insurance company will start to generate an actual profit on the policy that it sold.

Insuranceopedia explains Validation Period

There are a number of different costs that a validation period must cover, such as those of commissions, medical exams, and investigations. The policy will only begin to generate profit for the insurance company once the premium payments have accounted for all of these costs. Validation periods are also know as break-even periods. Measuring these periods is very important for insurance companies because it lets them know how long a policy will run before they can profit from it.

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