NC Life & Health cheat sheet

The McCarran-Ferguson Act (1945) reserves primary authority to regulate the business of insurance to the states; the NAIC drafts model laws but has no regulatory authority of its own.

The North Carolina Department of Insurance is headed by the Commissioner of Insurance, an elected statewide official who administers the insurance laws and issues certificates of authority.

Domestic insurer = chartered in North Carolina; foreign insurer = chartered in another state or U.S. jurisdiction; alien insurer = chartered outside the United States.

Only admitted (authorized) insurers may transact insurance in North Carolina; a non-admitted insurer may be used through surplus lines only when admitted markets cannot provide the coverage.

Rates must be adequate for solvency, not excessive, and not unfairly discriminatory among policyholders of like risk and expense.

Insurers pay a premium tax to the state; the tax is the principal revenue the state collects from insurance companies.

Unfair trade practices include misrepresentation, twisting, rebating, coercion, intimidation, defamation, boycott, and unfair claim settlement practices.

The North Carolina Life and Health Insurance Guaranty Association pays covered claims against insolvent admitted insurers; it never covers insurers that were not licensed in the state.

Department examiners conduct financial examinations and market conduct examinations; insurers must maintain minimum capital, surplus, and reserves.

A person must hold a valid license issued by the Commissioner to sell, solicit, or negotiate insurance; transacting without a license is unlawful and commissions cannot be legally retained.

North Carolina licenses renew every two years and require 24 hours of continuing education per renewal period, including at least 3 hours of ethics.

A producer must hold an appointment from the insurer, filed with the Commissioner, before acting for that insurer or receiving commissions from it.

Commissions may not be split with, or paid to, an unlicensed person; only licensed and appointed producers may be compensated for the sale of insurance.

Premiums collected by a producer are held in a fiduciary capacity for the insurer and must be accounted for and remitted; commingling with personal funds is prohibited.

A producer must notify the Commissioner of a change of address and of any administrative action or criminal prosecution within the timeframe set by statute.

Twisting is misrepresenting or making misleading comparisons to induce a policyholder to lapse, surrender, or replace coverage; churning is using existing policy values to generate new commissions.

Rebating is offering anything of value not specified in the policy as an inducement to purchase; both the person offering and the person accepting may be penalized.

The Commissioner may issue cease-and-desist orders, levy civil penalties, and suspend, revoke, or refuse to renew a license after notice and hearing.

Insurable interest must exist at the time the policy is applied for, not at the time of the insured's death.

A valid insurance contract requires offer and acceptance, consideration (premium), legal purpose, and competent parties; insurance is a contract of adhesion, unilateral, and aleatory.

Gross premium = net premium (mortality cost discounted for interest) + expense loading for commissions, taxes, and company operations.

Underwriting classifications are preferred, standard, substandard (table-rated), and declined; substandard risks pay an extra premium or receive a reduced benefit.

Conditional receipt gives interim coverage effective from the date of application or the date of the last required medical exam, whichever is later, if the applicant proves insurable as a standard risk.

The Medical Information Bureau is a coded information exchange among insurers; the Fair Credit Reporting Act requires notice to the applicant and gives a right to dispute inaccurate information.

Stock insurers are owned by shareholders and generally issue nonparticipating policies; mutual insurers are owned by policyholders and generally issue participating policies.

Producer authority is express (written in the agency contract), implied (reasonably necessary to carry out express duties), or apparent (what a third party reasonably believes).

The producer acts as a field underwriter: complete the application accurately, collect the initial premium, deliver the policy, and obtain a statement of good health when required.

Term insurance types include level, decreasing, increasing, renewable, and convertible; term provides pure protection with no cash value.

Whole life charges a level premium for life, guarantees cash value, and endows at the stated maturity age; limited-pay and single-premium versions compress the payment period.

Universal life separates the policy into a cash value account and a cost-of-insurance charge; Option A pays a level face amount, Option B pays face amount plus accumulated cash value.

Variable life and variable universal life place cash value in a separate account, so values fluctuate with subaccount performance; selling them requires a securities registration in addition to a life license.

The incontestability clause bars the insurer from contesting the policy for misrepresentation after two years; misstatement of age or sex adjusts the benefit instead of voiding coverage.

The suicide clause limits payment to a refund of premiums if death by suicide occurs within the stated period, commonly two years from issue.

Grace period is typically 30 or 31 days for paying a late premium; reinstatement generally requires evidence of insurability plus back premiums with interest, usually within three years.

Nonforfeiture options are cash surrender, reduced paid-up insurance, and extended term insurance; dividend options include cash, premium reduction, accumulation at interest, paid-up additions, and one-year term.

Settlement options include lump sum, interest only, fixed period, fixed amount, and life income (with period certain, refund, or joint and survivor features).

Health insurance transfers morbidity risk; underwriting evaluates the applicant's physical condition, medical history, occupation, and avocations.

Cost sharing is built from a deductible (amount paid before benefits), coinsurance (percentage split after the deductible), copayment (fixed dollar amount), and an out-of-pocket maximum.

An HMO uses a closed panel of providers, a primary care gatekeeper for specialist referrals, and capitation; non-emergency out-of-network care is generally not covered.

A PPO contracts with a network of providers, pays higher benefits in-network, generally requires no referrals, and allows out-of-network care at reduced benefits.

Coordination of benefits establishes payment order when a person is covered by two plans: the primary plan pays first and the secondary plan pays the balance, never exceeding total covered charges.

Disability definitions include total, partial, residual, presumptive, and recurrent disability; own-occupation definitions are broader for the insured than any-occupation definitions.

The elimination period is the waiting period before benefits begin; the benefit period is the maximum length of time benefits will be paid.

Utilization review may be prospective (precertification), concurrent (during treatment), or retrospective (after treatment) to confirm medical necessity.

Health policies set required timeframes for notice of claim, proof of loss, and payment of claims, and prohibit the insurer from altering the contract without the insured's consent.

Comprehensive major medical combines a deductible, coinsurance, and an out-of-pocket maximum; supplemental policies such as hospital indemnity, critical illness, and accident pay fixed benefits regardless of actual expenses.

Disability income insurance typically replaces 60 to 70 percent of earned income and may be reduced by Social Security, workers' compensation, or other employer benefits.

Long-term care benefits are triggered by inability to perform 2 of 6 activities of daily living for at least 90 days or by severe cognitive impairment; coverage includes home care, assisted living, and nursing home care.

Medicare Part A covers inpatient hospital care, Part B covers medical services with a monthly premium, Part C is Medicare Advantage, and Part D covers prescription drugs.

Medigap open enrollment is a six-month period beginning in the month the person is 65 and enrolled in Part B; during it, insurers must issue standardized plans without health underwriting.

COBRA continuation is 18 months for termination or reduced hours, 29 months when a disability extension applies, and 36 months for other qualifying events such as divorce or death.

The Affordable Care Act requires guaranteed issue, bans pre-existing condition exclusions, allows dependent coverage to age 26, and defines metal tiers at 60, 70, 80, and 90 percent actuarial value.

Convertible group term life and group health conversion privileges let a departing employee convert coverage to an individual policy without proving insurability, usually within 31 days.

Accidental death and dismemberment pays a principal sum for accidental death and a capital sum for loss of a limb or sight; it does not pay for death from illness or self-inflicted injury.

Health policies permit a free-look period after delivery during which the insured may return the policy for a full premium refund.

A pre-existing condition clause limits or excludes coverage for conditions diagnosed or treated during a look-back period; federal law prohibits such exclusions in ACA-compliant individual and small group plans.

HIPAA guarantees availability and renewability of group coverage, limits exclusions for pre-existing conditions when there is prior creditable coverage, and provides special enrollment rights.

Medicare Advantage plans may require network providers and often include prescription drug coverage, while original Medicare allows any provider that accepts Medicare assignment.

Long-term care nonforfeiture and inflation protection riders preserve some benefit value if premiums stop or costs rise over time.