North Carolina Life and Health Insurance Exam Review

Comprehensive vocabulary review flashcards covering North Carolina life insurance policies, provisions, nonforfeiture options, dividends, annuities, retirement accounts, and state insurance regulations.

Unbundled Policy

An insurance contract, such as Universal Life, in which mortality, expense charges, and interest credits are accounted for and displayed separately to the policyowner.

Universal Life Insurance

A flexible premium policy that combines annual renewable term insurance with an interest-accumulating cash value account, characterized by an unbundled structure and adjustable premium payments.

Option A (Universal Life)

A Universal Life death benefit option that provides a level death benefit equal strictly to the policy's face amount.

Option B (Universal Life)

A Universal Life death benefit option that pays an increasing death benefit equal to the policy face amount plus the accumulated cash value.

Corridor (Universal Life)

The required minimum gap or cushion maintained between the cash value and the death benefit in a Universal Life policy to prevent it from losing its tax-advantaged life insurance status.

Target Premium

The projected premium amount in a Universal Life policy suggested by the insurer to cover the cost of insurance and build cash value over time.

Equity Indexed Annuity

A fixed annuity product whose cash value is maintained in the insurer's general account and earns interest credited based on the performance of an external equity index, such as the S&P 500.

Separate Account

An investment account maintained separately from an insurer's general funds to hold underlying equity investments for variable life and variable annuity products, regulated by the Securities and Exchange Commission (SEC).

General Account

The primary investment account of an insurance company where funds for traditional fixed insurance and fixed annuity contracts are held and backed by conservative investments.

Straight Life Insurance

A permanent whole life policy with level premium payments payable for the entire lifetime of the insured up to age $100$.

Decreasing Term Insurance

A term life insurance policy featuring a death benefit that gradually declines over the policy term while the premium remains level, most commonly utilized for mortgage protection.

Limited Pay Life

A whole life insurance policy where premium payments are compressed into a specified shortened period (such as $20$ years or up to age $65$), while cash values and coverage continue for life.

Modified Life Policy

A whole life policy structured with an initial lower premium that increases only once during the policy's duration before remaining level.

Graded Premium Whole Life

A whole life policy structured with lower initial premiums that increase several times on a predetermined schedule over a specified period before leveling off.

Endowment

The point at which a whole life insurance policy's accumulated cash value equals the policy's total death benefit, typically occurring at age $100$.

Double Protection Policy

A policy combining whole life with an equal portion of term insurance; if the insured survives past the term period, the total death benefit is cut in half.

Jumping Juvenile Policy

A life insurance policy issued on the life of a minor that automatically increases in face amount at a specified adult age without requiring evidence of insurability.

Grace Period Provision

A mandatory policy clause allowing coverage to remain in force for a specified time after an overdue premium. If the insured dies during this window, the insurer pays the face amount minus the overdue premium; if the insured dies after expiration, no benefits are paid.

Extended Term Insurance

A nonforfeiture option that uses accumulated cash value to purchase paid-up term insurance providing the highest continued death benefit for a limited period.

Paid-Up Additions Option

A dividend option in a participating policy where declared dividends are used to buy small single-premium increments of permanent, paid-up life insurance.

Reduce Premium Dividend Option

A dividend option where declared policy dividends are directly applied toward reducing the policyowner's subsequent premium payment.

Accumulate at Interest Dividend Option

A dividend option where the insurer retains declared dividends in an interest-bearing account on behalf of the policyowner.

One-Year Term Dividend Option

A dividend option that uses declared dividends to purchase temporary, additional life insurance coverage for a duration of one year.

Policy Dividends

Returns of excess premium paid to policyowners of participating (PAR) life insurance policies, which are generally not subject to income tax.

Straight Life Annuity

An annuity settlement payout option that delivers the highest monthly income to a single annuitant, with all payments terminating immediately upon the annuitant's death.

Life with Period Certain

An annuity payout option that guarantees income payments for the lifetime of the annuitant, or for a specified minimum number of years to a beneficiary if the annuitant dies early.

Joint and Survivor Annuity

An annuity contract covering two or more annuitants that guarantees periodic income payments continuing until the last surviving annuitant dies.

Joint Life Policy

A life insurance contract covering two or more individuals that pays the death benefit upon the death of the first insured person.

Last Survivor Policy

A life insurance policy covering two or more lives that pays the death benefit only upon the death of the last surviving insured.

Installment Refund Annuity

An annuity payout structure guaranteeing that if the annuitant dies before receiving total payouts equal to the principal, the remaining periodic payments continue to a named beneficiary.

Incontestable Clause

A mandatory policy provision stating that after a policy has been in force for $2\text{ years}$ ($24\text{ months}$), the insurer cannot contest statements on the application or deny claims due to misrepresentation.

Free Look Period (Replacement)

A state-mandated provision granting the policyowner a $30$-day window to review a replacement policy and return it for a full refund of all premiums paid.

Conservation

Efforts made by an existing insurer or agent to discourage a policyowner from dropping or replacing their current insurance coverage.

Twisting

The illegal, unfair trade practice of using misrepresentation or incomplete comparisons to induce an insured to surrender or replace an existing policy to their financial detriment.

Misrepresentation

The unlawful act of making false, misleading, or deceptive written or oral statements regarding the terms, benefits, or dividends of an insurance policy.

Viatical Settlement

An agreement whereby a policyowner sells an existing life insurance contract to a third-party settlement provider in exchange for an immediate lump-sum cash payment.

Notice of Information Practices

A disclosure required under insurance privacy laws that must be delivered to an applicant at the time of application detailing how personal information will be gathered and used.

Certificate of Insurance

The document issued to each individual covered employee under a group life insurance policy describing their coverage, while the master policy is retained by the employer.

Contributory Plan

A group insurance plan where employees contribute toward premium costs, legally requiring a minimum participation rate of $75\%$ of eligible employees.

Noncontributory Plan

A group insurance plan in which the employer pays $100\%$ of the premium costs, requiring $100\%$ participation of all eligible employees.

Conversion Privilege (Group Life)

A policy right permitting an employee leaving a group plan to convert their group coverage into an individual permanent policy within $31\text{ days}$ without providing evidence of insurability.

Social Security Fully Insured Status

A status achieved under Social Security upon earning $40\text{ quarters}$ of coverage, funded through contributions from employees, employers, and self-employed individuals (not the federal government).

Primary Insurance Amount (PIA)

The mathematical base figure derived from an individual's earnings history that determines the monthly retirement benefit amount received under Social Security.

Key Person Insurance

A third-party business life insurance contract purchased, owned, and paid for by a business on the life of an essential employee to offset financial losses caused by that employee's death.

Cross-Purchase Buy-Sell Plan

A business succession arrangement where each partner purchases life insurance policies on the lives of all other partners; a $3$-person partnership requires $6$ individual policies.

Tax-Sheltered Annuity (TSA / 403(b))

A qualified retirement annuity vehicle established for employees of public school systems and eligible non-profit organizations, with distributions fully subject to ordinary income tax.

Insurable Interest

A legal and financial interest in the preservation of the life of the proposed insured that must exist strictly at the time of policy application.

Representations

Statements made by an applicant on an insurance application that are deemed true to the best of the applicant's knowledge and belief, rather than guaranteed warranties.

Conditional Receipt

A document issued to an applicant providing temporary coverage starting from the date of application or medical exam, provided the initial premium is paid and the applicant proves insurable as applied for.

Statement of Continued Good Health

A signed verification required from an applicant upon policy delivery if the initial premium was not submitted with the original application (such as under a COD application).

Unilateral Contract

An insurance contract structure where only one party—the insurer—makes an exchange of a legally enforceable promise to pay covered losses.

Insuring Clause

The central contract provision that defines the peril insured against and establishes the insurer's formal promise to pay death proceeds upon proof of loss.

Entire Contract Provision

A mandatory clause stating that the life insurance policy, the attached application, and any policy riders constitute the complete and entire agreement between the parties.

Collateral Assignment

A temporary transfer of partial policy rights to a creditor as security for a loan, entitling the lender to receive proceeds equal to the outstanding debt upon the insured's death.

Automatic Premium Loan (APL)

A policy provision that automatically borrows from accumulated cash value to pay an overdue premium at the end of the grace period, leaving the policy face amount unchanged.

Policy Reinstatement

The process of placing a lapsed policy back in force within a specified time limit by providing proof of insurability and paying all overdue premiums plus back interest, retaining the insured's younger original age.

Misstatement of Age Provision

A mandatory provision requiring an insurer to adjust death benefits to the amount that the paid premium would have purchased at the insured's correct biological age.

North Carolina Life and Health Insurance Guaranty Association

A statutory organization funded by assessments on member insurance companies to protect policyowners by covering policy claims in the event an insurer becomes financially insolvent.

Insurance Commissioner (North Carolina)

The state official empowered to enforce insurance laws, create rules and regulations, approve rate filings, request warrants, and petition for cease and desist orders against illegal acts.

Credit Life Insurance

A specialized form of term insurance written on a borrower where the lending institution is designated as the beneficiary, and where the creditor cannot restrict the borrower's choice of insurer.