NC Life & Health key terms

An insurance company that has been granted authority by a state insurance department to transact business in that state and is therefore subject to its laws, examinations, and guaranty fund protection.

The formal document issued by a state insurance regulator that permits an insurer to operate as an admitted carrier in that state; without it, the company is a nonadmitted insurer.

The National Association of Insurance Commissioners is a voluntary organization of state insurance regulators that drafts model laws and regulations and coordinates multistate oversight; its models are not binding until a state adopts them.

A statutory pool funded by admitted insurers that pays specified benefits, up to legal limits, to policyholders of an insurer that becomes insolvent; it does not cover every product or full contract value.

An official review of an insurer's or producer's sales, advertising, underwriting, claims, and recordkeeping practices to determine compliance with insurance laws, which can lead to fines or license actions.

An activity prohibited by insurance law, such as misrepresentation, false advertising, or unfair claims settlement, that regulators may punish with fines, license suspension, or cease-and-desist orders.

A person licensed by the state to sell, solicit, or negotiate insurance contracts on behalf of an insurer or for the public; the term includes agents and brokers.

The insurer's formal notice filed with the state insurance department authorizing a licensed producer to act as its representative for specific lines of insurance.

Required classroom or online instruction that a licensed producer must complete within each renewal period to keep the license active and stay current on laws and products.

Offering any part of the producer's commission, or something of value not stated in the policy, to persuade a buyer to purchase insurance; it is an illegal inducement in most states.

Misrepresenting or omitting facts about an existing policy in order to persuade a policyholder to lapse, surrender, or replace it, usually to sell a new contract.

The legal obligation of a producer who handles premiums or other funds belonging to others to hold them in trust, keep accurate records, and never commingle them with personal money.

The act of surrendering, lapsing, or using values from an existing life policy to buy a new one; it triggers required disclosure and comparison notices to protect the consumer.

A financial or love-and-affection relationship that would cause a person to suffer genuine loss if the insured died; it must exist at the time of application for a valid life policy.

A statistical chart showing, for each age, how many people per thousand are expected to die within a year; insurers use it, along with interest assumptions, to price life products.

The tendency of people with greater-than-average risk of loss to seek or keep insurance more eagerly than low-risk people, which can push claims above the level assumed in pricing.

The process of grouping applicants by health, age, occupation, and habits so each group's premium reflects its expected claims; results in preferred, standard, substandard, or declined offers.

A receipt given when an application and initial premium are submitted; it provides temporary coverage that begins only if the proposed insured meets the insurer's underwriting conditions.

An agreement in which the dollar amounts exchanged by the parties are unequal and depend on an uncertain event, so one party may receive far more than it paid.

Coverage that pays a death benefit only if the insured dies during a stated period; it builds no cash value and offers the largest face amount for the lowest initial premium.

Permanent coverage with level premiums payable for life or to a stated age; it accumulates guaranteed cash value and stays in force as long as required premiums are paid.

Permanent coverage with flexible premium payments and an adjustable death benefit; the cash value earns interest while monthly mortality and expense charges are deducted from it.

Permanent coverage in which cash value is invested in separate accounts chosen by the owner; values and death benefit may rise or fall with market performance, making it a security.

Choices available when a permanent policy with cash value is surrendered or lapses: take the cash, receive reduced paid-up insurance, or buy extended term insurance for a limited period.

A loan from the insurer secured by a permanent policy's cash value; interest accrues, and any unpaid balance plus interest is subtracted from the death benefit or surrender value.

A provision stating that after the policy has been in force for a set period, usually two years, the insurer generally can no longer void the contract for misstatements on the application.

A short period, typically 31 days, after a premium due date during which the policy stays in force; if the insured dies within it, any unpaid premium is deducted from the benefit.

Ways a beneficiary may receive life insurance proceeds: lump sum, interest only, fixed period, fixed amount, or life income; the owner selects them and may let the beneficiary choose.

A life policy funded with more premium than federal seven-pay limits allow; it loses favorable tax treatment, so loans and withdrawals are taxed and penalized like early annuity distributions.

The amount the insured must pay out of pocket for covered services before the health plan begins to pay its share, usually resetting each calendar or policy year.

The percentage of covered expenses, after the deductible, that the insured and the plan each pay; for example, an 80/20 split means the plan pays 80 percent.

A yearly cap on the deductibles, copayments, and coinsurance the insured pays for covered in-network care; once it is reached, the plan pays 100 percent of covered benefits.

A medical condition for which the insured received diagnosis or treatment before coverage began; group and individual plans may limit or exclude benefits for it under rules permitted by law.

Rules that determine which of two or more health plans pays first when a person is covered by more than one, preventing total payments from exceeding the actual expense.

A managed care plan in which members must generally use network providers and a primary care physician who coordinates care and authorizes referrals to specialists.

A managed care plan that contracts with a network of providers who accept discounted fees; members may use out-of-network providers but pay a larger share of the cost.

Coverage that replaces a portion of earned income, usually 50 to 70 percent, when the insured cannot work because of illness or injury, after an elimination period.

Coverage that pays for custodial or skilled care in a nursing home, assisted living facility, or the insured's home when the person cannot perform activities of daily living.

Privately sold Medigap policies that pay some of the coinsurance, deductibles, and other costs original Medicare leaves to the beneficiary; plans are standardized by letter.