What does Acquisition Costs mean? Read on to discover the definition & meaning of the term Acquisition Costs - to help you better understand the language used in insurance policies.
Direct costs an insurer incurs to "acquire" the premium for example, commissions paid to a broker or fronting company. These costs are required to be expensed in the same ratio as the premiums to which they relate are earned. For a calendar year policy, acquisition costs are expensed evenly each month, with the amount to be expensed in future periods recorded as deferred acquisition costs (an asset) in the balance sheet.
We hope the you have a better understanding of the meaning of Acquisition Costs.