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Validation Period

What is 'Validation Period'

The amount of time necessary for the premium on an insurance policy to cover the commissions, the cost of investigation, medical exams and other expenses associated with the issuance of the policy. The validation period is the period of time that passes before an insurance product becomes profitable or until the product can start to contribute to surplus.


Also known as the break-even period.

Explaining 'Validation Period'

The validation period is the time period that an insurer needs to amortize the expenses associated with establishing a life insurance policy. The length of the validation period varies with the policy and the associated costs. The validation period is important because it helps the insurer determine the length of time it takes until that policyholder is profitable for the company.


Further Reading


Deep learning for finance: deep portfolios
onlinelibrary.wiley.com [PDF]
… Validating … We calibrate on the period January 2012 to December 2013, and then validate on the period January 2014 to April 2016 … choose (similarly to classic portfolio theory) between two desirables, namely, index tracking with few stocks as well as a low validation error, these …

A bootstrap evaluation of the effect of data splitting on financial time seriesA bootstrap evaluation of the effect of data splitting on financial time series
ieeexplore.ieee.org [PDF]
… Validating … We calibrate on the period January 2012 to December 2013, and then validate on the period January 2014 to April 2016 … choose (similarly to classic portfolio theory) between two desirables, namely, index tracking with few stocks as well as a low validation error, these …

Validation of agent-based models in economics and financeValidation of agent-based models in economics and finance
link.springer.com [PDF]
… Validating … We calibrate on the period January 2012 to December 2013, and then validate on the period January 2014 to April 2016 … choose (similarly to classic portfolio theory) between two desirables, namely, index tracking with few stocks as well as a low validation error, these …

Validating and calibrating agent-based models: a case studyValidating and calibrating agent-based models: a case study
link.springer.com [PDF]
… Validating … We calibrate on the period January 2012 to December 2013, and then validate on the period January 2014 to April 2016 … choose (similarly to classic portfolio theory) between two desirables, namely, index tracking with few stocks as well as a low validation error, these …

A cross‐validation analysis of neural network out‐of‐sample performance in exchange rate forecastingA cross‐validation analysis of neural network out‐of‐sample performance in exchange rate forecasting
onlinelibrary.wiley.com [PDF]
… Validating … We calibrate on the period January 2012 to December 2013, and then validate on the period January 2014 to April 2016 … choose (similarly to classic portfolio theory) between two desirables, namely, index tracking with few stocks as well as a low validation error, these …

Financial applications of discriminant analysis: a clarificationFinancial applications of discriminant analysis: a clarification
www.jstor.org [PDF]
… Validating … We calibrate on the period January 2012 to December 2013, and then validate on the period January 2014 to April 2016 … choose (similarly to classic portfolio theory) between two desirables, namely, index tracking with few stocks as well as a low validation error, these …

CAPM and APT validation test before, during, and after financial crisis in emerging market: evidence from IndonesiaCAPM and APT validation test before, during, and after financial crisis in emerging market: evidence from Indonesia
papers.ssrn.com [PDF]
… Validating … We calibrate on the period January 2012 to December 2013, and then validate on the period January 2014 to April 2016 … choose (similarly to classic portfolio theory) between two desirables, namely, index tracking with few stocks as well as a low validation error, these …

Different approaches to forecast interval time series: a comparison in financeDifferent approaches to forecast interval time series: a comparison in finance
link.springer.com [PDF]
… Validating … We calibrate on the period January 2012 to December 2013, and then validate on the period January 2014 to April 2016 … choose (similarly to classic portfolio theory) between two desirables, namely, index tracking with few stocks as well as a low validation error, these …

Empirical validation on excess volatility puzzleEmpirical validation on excess volatility puzzle
www.globalpresshub.com [PDF]
… Validating … We calibrate on the period January 2012 to December 2013, and then validate on the period January 2014 to April 2016 … choose (similarly to classic portfolio theory) between two desirables, namely, index tracking with few stocks as well as a low validation error, these …

Validation Panzar-Rosse Model in determining the structural characteristics of Tunisian banking industryValidation Panzar-Rosse Model in determining the structural characteristics of Tunisian banking industry
academicjournals.org [PDF]
… Validating … We calibrate on the period January 2012 to December 2013, and then validate on the period January 2014 to April 2016 … choose (similarly to classic portfolio theory) between two desirables, namely, index tracking with few stocks as well as a low validation error, these …



Q&A About Validation Period


What are the distribution and consumption of goods and services?

Distribution and consumption of goods and services.

Why do policies need to be profitable in order for an insurance company to stay solvent?

If a policy isn't profitable then it doesn't contribute anything towards surplus which means that there will be no money available if claims come in later on down the road.

How does the validation period differ from break-even point?

The validation period is longer than break-even point.

What is the validation period?

The validation period is the amount of time necessary for a policy to cover commissions, investigation, medical exams and other expenses associated with the issuance of a policy.

What is the production of goods and services?

The production of goods and services.

What is a good?

A good is anything that can be used to satisfy a human want or need.

What are some examples of how long it takes for policies to become profitable?

Policies may take as little as one year or as long as ten years before they become profitable.

How does one measure a good's value in economics?

One measures its value in economics by looking at what people are willing to give up to get it, or what they would be willing to do without in order to have it.