Deferred Acquisition Costs Definition & Meaning | Insurance Term | CSIMarket
CSI Market
Sign In | Register

Glossary

Deferred Acquisition Costs

Insurance Term

Deferred Acquisition Costs (DAC) refers to the costs incurred by an insurance company over the process of acquiring a new policyholder, including marketing, advertising, commissions, and other related expenses. These costs are typically paid upfront by the insurance company, but benefit the company over the life of the policy. As such, the expenses are deferred or spread out over the duration of the policy, rather than being shown as an immediate expense on the company*s financial statements.

DAC is used in the insurance industry as a way to allocate expenses and ensure accurate financial reporting. By deferring the costs over time, insurance companies are able to accurately match expenses to the premiums earned from policies, which helps to ensure the company remains financially stable and profitable. Additionally, DAC plays a significant role in the valuation of insurance companies, as it is used to determine the company*s tangible net worth.

Overall, Deferred Acquisition Costs is an important component of insurance company*s financial statements as it helps them allocate expenses over time and provide accurate financial reporting while maintaining profitability.


More Glossary Terms Beginning with D
  • Daily Average Revenue Trades DARTs
    Total revenue trades in a period divided by the number of trading days during that period.
    Financial Term Letter: D
  • DEA Drug Enforcement Administration
    Drug Enforcement Administration, the United States federal government agency responsible for enforcement of drugs regulated by the FDA.
    Health Care Term Letter: D
  • Debt Coverage Ratio
    A financial strength ratio that measures a companys ability to repay its debt. Debt Coverage Ratio above 1 indicates the company is able to repay its debt within one year. Debt Coverage Ratio at 0.25 indicates the company is able to repay 25% of its debt within one year. The higher the number, the stronger the financial position of the company. Debt Coverage Ratio Formula = (Ebitda / Debt)
    Fundamental Analysis Letter: D
  • Debt to Equity Ratio
    A financial strength ratio that measures proportion of companys Debt to Stockholders Equity. Debt to Equity Ratio displays companys indebtedness and the leverage of Stockholders Equity. The number indicates how much company owes of total Debt for one dollar of stockholders equity. The lower the number, the stronger the balance sheet of the company. Debt to Equity Ratio Formula = (Debt / Stockholde
    Fundamental Analysis Letter: D
  • Deductible
    The amount of loss that an insured retains.
    Insurance Term Letter: D
  • Defensive Instruments
    include high quality fixed income securities and money market instruments. Investors will use temporary defensive instruments in response to adverse market, economic, political or other conditions. When investors takes a defensive position, it may miss out on investment opportunities that could have resulted from investing in accordance with its principal investment strategy. As a result, investor
    Financial Term Letter: D
  • Deferred Acquisition Costs
    Primarily commissions and premium-related taxes that vary with, and are primarily related to, the production of new contracts and are deferred and amortized to achieve a matching of revenues and expenses when reported in financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
    Insurance Term Letter: D
  • Deficiency
    With regard to reserves for a given liability, a deficiency exists when it is estimated or determined that the reserves are insufficient to pay the ultimate settlement value of the related liabilities. Where the deficiency is the result of an estimate, the estimated amount of deficiency (or even the finding of whether or not a deficiency exists) may change as new information becomes available.
    Insurance Term Letter: D
  • Deflation
    What is Deflation? Deflation is constant decline in general level of prices, usually attributed to contraction of available money and credit. When the volume of money declines but quantity of products and services remain unchanged or decline on the lower level, results are higher lower prices (Deflation). Deflation is measured with CPI on the retail level and with PPI on the Wholesale level The Co
    Economy Term Letter: D
  • Deposit Margin
    Represents net interest income expressed as a percentage of average deposits.
    Financial Term Letter: D
  • Depriciation
    A charge against the companys earnings that allocates the cost of property, plant and equipment over the estimated useful lives of the assets. Statement of Income
    Financial Term Letter: D
  • Derivative
    A financial instrument or other contract, the price of which is directly dependent upon the value of one or more underlying securities, interest rates or any agreed upon pricing index. Derivatives cover a wide assortment of financial contracts, including forward contracts, options and swaps.
    Financial Term Letter: D