Deferred acquisition costs (DAC)

Deferred acquisition costs (DAC),

Definition of Deferred acquisition costs (DAC):

  1. This involves holding off on recognizing costs related to insurance until the legal agreement has been signed by the insurance firm and the client.

  2. Insurance companies face large upfront costs when issuing new business, including referral commissions to external distributors and brokers, underwriting, and medical expenses. Often these costs can exceed the premiums paid in the early years of different types of insurance plans.

  3. Deferred acquisition costs (DAC) is an accounting method that is applicable in the insurance industry. Using the DAC method allows a company to defer the sales costs that are associated with acquiring a new customer over the term of the insurance contract.

How to use Deferred acquisition costs (DAC) in a sentence?

  1. Using this accounting method tends to reduce the first-year strain of policy and produces a smoother pattern of earnings.
  2. Companies may only defer costs associated with the successful placement of new business and cannot amortize all back-office expenses.
  3. Deferred acquisition costs (DAC) is an accounting method that is applicable in the insurance industry.
  4. Using the DAC method allows a company to defer the sales costs that are associated with acquiring a new customer over the term of the insurance contract.

Meaning of Deferred acquisition costs (DAC) & Deferred acquisition costs (DAC) Definition