valid contract. A contract that is enforceable at law. Contrast with void contract. See also voidable contract.

validation period. The amount of time required for a product to become profitable or for an insurance product to begin contributing to surplus. Also known as break-even period.

validation point. An insurance-specific version of a break-even point, it is the point at which a product’s asset share is equal to the policy reserves for the product. See also asset share and
break-even point.

valuation. (1) The formal process of calculating the monetary value of a company’s assets, liabilities, and owners’ equity. (2) The process of setting reported values for an insurer’s invested assets. In the United States, insurers must comply with state laws that specify how to determine the value of invested assets for
statutory reporting purposes.

valuation actuary. An expert in the mathematics of insurance who specializes in rendering a professional opinion as to proper values for an insurance company’s assets and liabilities.

valuation mortality table. A type of mortality table used for calculating statutory reserves (solvency reserves) and that has a safety margin built into the mortality rates.

value-added activity. An activity that makes a product more valuable to the customer.

valued contract. A type of insurance contract that specifies in advance the amount of the benefit that will be payable when a covered loss occurs, regardless of the actual amount of the loss incurred. A life insurance policy is a valued contract. Contrast with contract of indemnity.

variable annuity. An annuity under which the amount of the accumulated value and the amount of the periodic annuity benefit payments fluctuate in accordance with the performance of a specified pool of investments. Premiums paid for a variable annuity are deposited into an insurer’s separate account in the United States and segregated account in Canada. Within a separate or segregated account, the insurer maintains many subaccounts that allow the contract owner to invest in a wide variety of investments. The contract owner assumes most of the annuity contract’s investment risk. Contrast with fixed annuity.

variable budget. See flexible budget.

variable contract. An insurance or an annuity contract in which the contract owner allocates the premiums paid among one or more pools of investments, known as subaccounts. A variable contract may offer a fixed-interest subaccount, but, under most of the subaccounts offered, the investment results are variable. Variable contracts offer only limited guarantees as to investment return, cash accumulation value, or death benefit.

variable cost. A business cost that changes in direct response to changes in the level of operating activity. Contrast with fixed cost.

variable interest rate. An interest rate that fluctuates according to the rise and fall of interest rates in the marketplace.

variable investment account. See subaccount.

variable life (VL) insurance. A form of permanent life insurance in which premiums are fixed, but death benefits and other values may vary, reflecting the performance of the subaccounts in an insurer’s separate account.

Variable Life Insurance Model Regulation. In the United States, a National Association of Insurance Commissioners (NAIC) model law that establishes qualifications an insurer must meet in order to market variable life insurance and specifies requirements that variable life insurance policies must meet.

variable payout option. A variable annuity payout option whereby the insurer makes a series of annuity payments that vary throughout the payout period based on the performance of the underlying subaccounts.

variable-premium life insurance policy. See indeterminate premium life insurance policy.

variable subaccount. See subaccount.

variable universal life (VUL) insurance. A form of permanent life insurance that combines the premium and death benefit flexibility of universal life insurance with the investment flexibility and risk of variable life insurance. With this type of policy, the death benefit and the cash value fluctuate according to the contract’s investment performance. Also known as universal life II.

vertical analysis. A type of financial analysis that reveals the relationship of each financial statement item to a specified financial statement item during the same reporting period. Contrast with horizontal analysis.

vested. The status of a retirement plan participant who has met requirements giving her the right to receive partial or full retirement benefits even if she terminates employment prior to retirement.

vested commission. In insurance sales, a commission that is guaranteed payable to an agent even if the agent no longer represents the company when the commission comes due.

viatical company. An organization that buys life insurance policies from people who have catastrophic or life-threatening conditions or illnesses.

vision care coverage. Supplemental medical expense coverage that provides benefits for expenses incurred in obtaining eye
examinations and corrective lenses.

VL. See variable life insurance.

void contract. A contract that cannot be legally enforced by either party and that creates no legal obligation for either party to carry out the terms of the agreement. Contrast with valid contract. See also voidable contract.

voidable contract. A contract in which one party has the right to avoid his or her obligations under the contract without incurring legal liability to the other party. See also valid contract, void contract, and voidable contract.

VUL. See variable universal life insurance.