Part 1 Life Insurance Exam Study

NC life policy grace period

31 days after a premium is due, except the first premium. Death coverage remains in force during this period.

Death during NC life grace period

The death benefit is payable, but the insurer may deduct unpaid premiums from the benefit.

NC life incontestability

After the policy has been in force 2 years, the insurer generally cannot contest validity for application misstatements; nonpayment remains an exception.

NC suicide limitation

A policy may limit the benefit for suicide during no more than the first 2 years; it must return at least premiums paid during that period.

NC life reinstatement period

Generally within 5 years after premium default if the policy was not surrendered and its cash value was not exhausted.

NC reinstatement requirements

Written application, satisfactory evidence of insurability, overdue premiums, outstanding policy debt and applicable interest.

NC ordinary life nonforfeiture eligibility

After at least 1 full year of premiums, a qualifying policy must offer the required nonforfeiture benefit on default.

NC industrial life nonforfeiture eligibility

After at least 3 full years of premiums, a qualifying industrial policy must offer the required nonforfeiture benefit.

NC nonforfeiture request deadline

For the statutory paid-up option, request it no later than 60 days after the defaulted premium was due.

NC new life policy free look

At least 10 days after receiving a new life policy to return it for a premium refund.

NC replacement life policy free look

At least 20 days after receiving a replacement life policy to return it for a premium refund.

NC address or email update

A licensee must report a residential or email-address change in writing within 10 business days.

NC late address update fee

$50 administrative fee for not reporting a residential or email change within 10 business days.

NC conviction notice

Report a criminal conviction in writing within 10 days of conviction; motor vehicle infractions are excluded.

NC criminal prosecution notice

A producer reports a criminal prosecution within 30 days after the initial pretrial hearing or similar proceeding.

NC administrative action notice

A producer reports certain administrative actions within 30 days after final disposition, including FINRA enforcement actions.

NC insurer appointment deadline

An appointing insurer files notice within 15 days after the first insurance application is submitted.

NC appointment renewal fee

The appointing insurer remits the annual appointment renewal fee before April 1.

NC industrial life policy limit

Industrial life insurance has a face amount no greater than $1,000 and premiums payable monthly or more often.

NC guaranty association basic limit

Generally the lesser of covered obligations or $300,000 in aggregate benefits, including cash values, per life for covered life contracts.

NC guaranty association purpose

Protects eligible owners and beneficiaries if a member insurer becomes impaired or insolvent; not protection from investment market losses.

NC annuity grace period

At least 31 days for required payments after the first; the annuity contract remains in force.

NC annuity incontestability

For applicable contracts requiring statements, generally incontestable after 2 years while the relevant person lives, except nonpayment.

Commissioner of Insurance

State official who regulates the insurance business, enforces NC insurance laws, and investigates violations.

Certificate of authority

Permission issued to an insurer to transact insurance in North Carolina; distinct from an agent's producer license.

Producer license versus appointment

A license authorizes a producer for a line of insurance; an appointment authorizes that producer to represent a particular insurer.

Domestic insurer

An insurer formed under North Carolina law.

Foreign insurer

An insurer formed under the law of another US state.

Alien insurer

An insurer formed under another country's laws.

Unauthorized insurer

Insurer lacking a certificate of authority to transact a particular insurance business in NC, subject to lawful exceptions.

Rebating

Offering an illegal incentive such as an unauthorized premium refund or benefit to induce someone to buy insurance.

Twisting

Using misleading statements or comparisons to induce a policyowner to replace an existing policy.

Churning

Using existing policy value to buy another policy primarily for producer compensation without adequate policyowner benefit.

Misrepresentation

False or misleading statements about a policy's benefits, terms, financial strength, or conditions.

Defamation

False or malicious statements meant to damage an insurer's reputation or business.

Coercion

Using threats or unfair pressure to force someone to buy insurance.

Unfair discrimination

Treating insureds in the same relevant risk class differently without a lawful underwriting reason.

Unfair claims settlement practice

A prohibited pattern of improper claims handling such as unreasonable delays or unfair denials.

Replacement transaction

New life insurance or annuity purchase causes an existing policy to lapse, be surrendered, reduced, borrowed against, or otherwise materially changed under replacement rules.

Replacement notice

Required notice informing applicants about risks of replacing existing coverage, such as new surrender charges or new contestability periods.

NAIC

National Association of Insurance Commissioners; develops model laws and coordination standards but does not itself license individual NC producers.

Unfair trade practice

Conduct prohibited by insurance law, including deceptive sales, misleading advertisements, and certain discriminatory practices.

Cease-and-desist order

Regulatory command to stop a prohibited activity; noncompliance can lead to further penalties.

Fiduciary handling of premiums

A producer entrusted with insurer or consumer money must handle it properly; conversion or misuse can justify discipline.

Insurable interest in life insurance

At policy inception, the applicant must have a valid interest in the insured's continued life; a person always has an insurable interest in their own life.

STOLI

Stranger-originated life insurance: arrangement initiated to obtain a policy for investors without legitimate insurable interest; differs from a legitimate later settlement.

Viatical settlement

Sale of an existing life policy to a third-party purchaser for an amount typically below its death benefit.

Viatical settlement broker

Represents the policyowner in arranging a viatical settlement, rather than buying the policy for its own account.

Viatical settlement provider

Purchases or contracts to purchase life policies in a regulated viatical settlement arrangement.

Fraternal benefit society

Member-based organization organized under a lodge system that provides insurance benefits to qualifying members.

Annuity accumulation period

Time before payout when premiums and interest or investment gains accumulate in the contract.

Annuitization

Conversion of annuity contract value into an income payment stream under a selected settlement option.

Immediate annuity

Annuity whose income payments generally begin within one year after purchase.

Deferred annuity

Annuity with a longer accumulation stage; income payments begin at a later date.

Single premium immediate annuity (SPIA)

Purchased with one lump sum and starts income payments within one year.

Flexible premium deferred annuity

Allows multiple contributions of varying amounts before income payments begin.

Fixed annuity investment risk

Insurer assumes risk for its guaranteed rate and guaranteed benefits; contract guarantees depend on insurer claims-paying ability.

Variable annuity investment risk

Owner bears investment risk in selected separate-account subaccounts; accumulation units change in value.

Separate account

Account holding investments supporting variable products; its investment results are separate from the insurer's general account.

Accumulation unit

Unit representing variable annuity value before annuitization; its unit value changes with investment performance.

Annuity unit

Unit used in calculating variable annuity income payments after annuitization.

Assumed interest rate (AIR)

Benchmark used to calculate variable annuity payments; actual investment results relative to it affect later payments.

Indexed annuity

Interest credits depend partly on an index formula, often with participation rates, caps, spreads, or floors.

Index participation rate

Portion of an index gain used in computing credited interest before other contract adjustments.

Indexed annuity cap

Maximum index-linked credited interest for a stated crediting period.

Indexed annuity spread

A percentage or margin deducted from index performance when calculating credited interest.

Life-only annuity

Income paid for annuitant's lifetime; payments end at death without a guaranteed continuation or refund.

Life with period certain

Pays for life, but if death occurs within the guaranteed period, remaining period payments go to the beneficiary.

Cash refund life annuity

If annuitant dies before receiving payments equal to the guaranteed purchase amount, shortfall is refunded in a lump sum.

Installment refund life annuity

Any remaining guaranteed purchase amount is paid to the beneficiary in installments.

Joint and survivor annuity

Pays while at least one of two covered annuitants lives; survivor payment can be 100% or a smaller specified percentage.

Fixed-period annuity payout

Payments last a specified number of years; if the recipient dies early, remaining payments generally go to the beneficiary.

Fixed-amount annuity payout

Pays a specified dollar amount until the contract proceeds are exhausted; payment duration is not fixed.

Annuity death before annuitization

Contract death benefits generally go to the designated beneficiary as specified; the payout option hasn't yet begun.

Annuity death after annuitization

Remaining payments depend on the elected settlement option; life-only stops, while certain/refund options can continue.