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.
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.
