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acquisition costs

Acquisition costs refer to direct costs an insurer incurs to "acquire" the premium—for example, commissions paid to a broker or fronting company.

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Additional Information

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.

Related Terms

A premium is the amount of money an insurer charges to provide the coverage described in the policy...