NC Life Insurance

NC Life Insurance Cash Value Money accumulation in a permanent policy which the policy owner may borrow as a policy loan or receive if the policy is surrendered before maturity. Upon maturity or endowment the cash value is paid to the policy owner. Cash value may be used as a source of supplemental income. Non- Participating Policies Insurance policies which do not pay dividends to policy owners. Participating Policies Policies that may pay annual dividends to policy owners. Human Life Value Approach This approach measures the actual future earnings and services of a person at risk of coverage as determined by the value of the the individual to his/her dependents. Human Life Value Factors Factors: 1. After-tax annual salary, 2. Annual expenses (no hobbies), 3. Value of Personal Assets, 4. Years remaining of individuals expected ability to work, 5. Ages of all family members, 6. Value of the individual's dollar as it depreciates over time, 7. Present salaries of all wage earners. Needs Analysis Approach This approach determines a need for coverage upon the premature death of an individual. It always assumes the death of an individual to be immediate. Calculates all financial needs caused by an immediate death. Buy-Sell Agreement Business use of Life Insurance where partners in a business buy life insurance on each other. They agree that when one of them dies the survivors have the right to purchase the deceased partner's share of the business. The death benefit from the insurance is used to finance the purchase. (Cross Purchase Plan, Entity Plan) Key Person Insurance protects against the loss of a key employee or key executive by making the business the beneficiary if a key person dies. The business is the owner, premium payor, and beneficiary. Deferred Compensation Insurance Payment for services under any employer-sponsored plan or arrangement that allows an employee (for tax-related purposes) to defer income to the future. The employer is the policy owner and beneficiary. Split-Dollar Plan a life policy in which employee and employer split the premium payments and if the employee dies while working for this employer, the employer receives the total of premiums paid. The remaining balance is paid to the employee's beneficiary. A certain period of time must elapse before an employee is entitled to any of the cash value. Since an individual life insurance policy is being issued, proof of insurability is required. Classes of Life Insurance Plans Plans include: -Group, individual, ordinary life insurance, Industrial, permanent, term, participating, non-participating, fixed, flexible, and variable. Group Life Insurance provided under a master contract for members of qualified groups. Generally written as a one year renewable term plan without medical examinations and at rates that are more favorable than individual policies. The premiums are usually employer paid but may be paid on a shared basis with the employee. Individual Life Insurance the greatest difference between group and individual life insurance is the full latitude of ownership. Unlike group, individual policies may be of any classification or type insurance. The policy owner may use the policy proceeds to build equity (cash value). Ordinary Life Insurance Is defined as any type of life insurance that is not group, industrial or government insurance. A large number of people are insured with an ordinary life policy making this the larger portion of the life insurance in force today. Evidence of insurability is required, and the underwriter considers age, sex, weight, health, and tobacco use as this info. applies to the prospective insured. The grace period is 30 days. Permanent Life Insurance This type of insurance is designed not only to provide the beneficiary a death benefit if the insured dies, but also to provide the insured/owner a build up of cash value from which they may borrow for emergency expenses. Term Life Insurance this is known as "pure protection" insurance and is less expensive than "permanent" life insurance. Used for death protection only. Participating Life Insurance A policy marketed by a mutually owned company. The word participating means a dividend will be paid to the policyowner as dividends are declared. The company is not required to issue only participating policies (mutual companies are controlled by a board of directors voted into office by the policyholders). Non-Participating Life Insurance A pure cost policy marketed by a company owned by stockholders with all future values guaranteed. (Stockholders) Fixed Life Insurance the policy has a fixed amount of coverage, benefits and premium. Without riders, future inflationary trends and money values will depreciate the policy's effectiveness Flexible Life Insurance Recently the marketing of new policies, such as Universal and Variable Universal Life, has given the policyowner more flexibility in terms of premiums, investment objectives and other policy benefits. These policies assist the insured during inflationary periods with the natural flexibility of each policy. Variable Life Insurance A form of fixed-premium whole life insurance, where the death benefit and cash value fluctuate according to fluctuations of the separate account, with the policy owner accepting the risk. The separate accounts are normally mutual funds and a security license is required. It is designed to provide a hedge against inflation, and has a guaranteed minimum face amount. Insurance Rider written form attached to an insurance policy that alters the policy's coverage Entire Contact Provision Consist of the policy, plus any riders, and a copy of the application. All statements made by the insured are deemed representations and not warranties. Insuring Clause Defines who is insured by whom and the amount of benefit/coverage provided by the policy. It states the obligation of the insurer and the risk that is considered: premature death. Free Look (Right to Examine Period) allows the insured/policyowner a specified number of days following receipt of the policy to look it over and if dissatisfied for any reason to return it for a full refund of premium (usually 10 days). Consideration Policy owner must pay something of value (premium) in exchange for the insurer's promise to pay benefits. Owner's Rights (Ownership) Policyowners have the right to all cash values, loans, dividends, and any other benefits. He/she may change the beneficiary, assign the policy and exercise all privileges and options of ownership. The insured and owner need not be the same person. Changes (modifications) must be in writing, signed by an executive officer of the insurer, approved by the policy owner and made part of the entire contract. An agent cannot alter or waive provisions. Grace Period The time period after the premium due date and before a policy lapses. The policy is in force during this period and the Period Provision states that if death occurs during this period, the insurer pays the death benefit, minus any premiums or loans. Automatic Premium Loans A provision in cash-value life insurance policies that allows any premium not paid by the end of the grace period to be paid automatically with a policy loan if sufficient cash value or dividends have accumulated. Reinstatement To reinstate a lapsed policy, back premiums plus interest need be paid, proof of insurability is required, and a request for reinstatement has a time limit. Will put policy back in force when in a lapsed mode and before it is cash surrendered, usually 3 years from the start of the lapsed mode. Incontestability States that the insurer cannot contest statements contained in the application after the policy has been in force (usually 2 years) including errors, misstatements, and even fraud. Assignment Provision policy owner's right to assign the policy; 2 types: absolute assignment- transfer all rights of ownership, permanent, new policy owner doesn't need insurable interest in insured; collateral assignment- transfer of partial rights, usually done to secure a loan, partial and temporary 'til debt is repaid Suicide Clause If cause of death is suicide within the first 2 years of policy, the company will return the premiums and not pay death benefit Misstatement of Age or Gender States that if the insured's age or sex has been misstated, the insurer is allowed, at the time of claim, to adjust benefits according to the amount the premiums would have purchased at the correct age or sex. Conversion Option Allows the insured to convert to some other type of policy, such as a term policy to a cash value policy. Life Insurance Exclusions Insurer will not provide coverage for the following coverage: 1. Aviation (does not apply for commercial flights), 2. Status Clause (No coverage for individuals in the military), 3. Results Clause (No coverage if death is the result of war declared or undeclared, only premiums), 4. Hazardous Occupation (stunt people). Policy Provision Prohibited by Law 1. No provision shall limit the time for any legal action to be taken to less than one year after the act occurs. 2. No provision shall allow backdating. 3. No provision shall allow the settlement to be less than the face amount at maturity. 4. " " shall designate the agent as the representative of the insured. 5. " " shall require contract forfeiture when an outstanding loan is less than the loan value. Common Disaster Clause (Uniform Simultaneous Death Law) Method of payment of the proceeds of the policy by the insurer if the insured and the named beneficiary die simultaneously in the same accident. Spendthrift Clause A clause that prevents the debtors of a beneficiary from collecting the benefits before he/she receives them. Endowment The maturity date or time at which the cash value equals the face amount. If the policy matures, it is said to endow, and the proceeds are paid to the policy owner. Endowment policies place greater emphasis on savings than on the death benefit, along with the forced savings with a life insurance benefit (higher premiums than Whole Life policies) Face Amount The death benefit payable on a life policy Term Policies Term premiums increase as the insured's age increases. Term is more expensive as the insured's age increases (low initial premiums). Term Insurance provides protection, but does not generate a cash value. Level Term Insurance provides a level amount of protection for a specified period, after which the policy expires. Level premium and level death benefit. Most group life insurance is written level term. Decreasing Term Insurance characterized by benefit amounts that decrease gradually over the term of protection but the premium stays the same throughout. Used to cover LOANS or MORTGAGES. Increasing Term Insurance Term life insurance in which the death benefits increases periodically over the policy's term. Usually purchased as a cost of living rider to a whole life policy. Re-Entry Term Insurance A term insurance policy that allows the insured individual to provide evidence of insurability to qualify for a lower premium at certain intervals. Life-Expectancy Term Insurance Provides a level term benefit over the life expectancy of the insured using a specific mortality table. The contract is pure protection, but with the level premium concept, a cash value accumulates to help offset the required premiums in the later years. Annually Renewable Term Insurance the simplest form of term life insurance is for this term. The death benefit is paid by the insurer if the insured dies during the one-year term, while no benefit is paid if the insured dies on day after the last day of the one-year term. Renewable Term Feature The right to renew on a renewal date without evidence of insurability. The renewal premium is based upon attained age. (Decreasing term is never renewable). Convertible Term Feature The right to convert a permanent policy without evidence of insurability. The premium is based upon attained age or issued age. (Group life is both convertible and renewable). Whole Life Policies used for a permanent need of protection (family protection and estate conservation, just to name two prominent uses). Ordinary/Straight Life Policy Both the premium and the face amount (death benefit) remain level to age 100 or death of the insured, whichever comes first. Limited Payment Policy life insurance that is paid up after a specified number of years, or until the insured reaches a certain age, but the face amount (death benefit) remains level to age 100. Indeterminate Premium specifies two premium rates: a guaranteed maximum, and a lower rate the insured actually pays. The lower premium level is for a set period of time. Then the company establishes a new rate that may be higher or lower than the initial premium. But your premium can never be more than the guaranteed maximum. Current Assumption (Interest Sensitive) Whole Life a Straight Whole Life policy with the following variations: a) flexible premiums, with adjustments made on specific anniversaries, as specified by the insurer, b) the face amount (death benefit) does not fluctuate, c) the (current) interest rate is higher than the insurer's rate for traditional whole life policies, providing some inflation protection. Enhanced Ordinary Life (Economatic) this policy was designed for participating policies using the dividends to purchase additional insurance. The applicant needs a greater amount of protection than he/she can presently afford. The Economatic allows the applicant to purchase a reduced amount of whole life with a term rider attached to make up the difference. Within a stated period of time the dividends will purchase additional insurance until the face amount plus the additional insurance equals the original need. The Plan is generally computed on a 70/30 percent split (70% whole life and 30% term). If the actual dividends are not sufficient to provide the additional coverage over the stated time, the dividends will be diverted to buy 1 year renewable term until such time as the original contract limits are reached. Equity Indexed Whole Life Most of the premium (generally 80 to 90%) is invested in traditional fixed income securities. The remainder of the premium is invested in contracts tied to a stipulated stock index. When there is an increase in the market, a given percentage of the gain is credited to the policy. When the market declines, the policy is credited with the minimum guaranteed rate.