Free NC L&H Exam Flashcards

Both stay level (unchanged) for the entire level term period - unlike decreasing term, where the death benefit declines while the premium stays level.

Premium remains level while the death benefit steadily declines over the policy term - commonly used to cover a shrinking debt, such as a mortgage.

The right to convert the term policy to a permanent (cash-value) policy without new evidence of insurability, usually within a specified conversion period.

Permanent coverage with a level premium for life, a guaranteed cash value that grows on a fixed schedule, and a guaranteed level death benefit.

Limited-pay whole life is paid up after a set number of years (e.g., 20-pay life) while coverage continues for life; straight whole life requires premiums for as long as the insured lives.

Permanent coverage with flexible premiums and an adjustable death benefit; the policy separately discloses the mortality charge, expense charge, and interest credited to cash value.

Option A pays a level total death benefit (face amount only - cash value reduces the net amount at risk). Option B pays the face amount PLUS the accumulated cash value, so the total benefit grows as cash value grows.

Cash value is invested in separate accounts chosen by the policyowner, so cash value (and for variable life, the death benefit) can fluctuate with investment performance; VUL adds universal life's flexible premium on top.

An immediate annuity begins income payments within about a year of purchase and is funded with a single premium. A deferred annuity accumulates funds during an accumulation period before payments start later.

Because payments stop entirely at the annuitant's death with no refund or continuation to a beneficiary - the insurer keeps any remaining value, which funds the higher payout.

After the policy has been in force for a specified period (typically 2 years), the insurer can no longer contest or void the policy for misstatements in the application, except for nonpayment of premium (and often fraud).

The grace period (typically 30-31 days) lets the owner pay an overdue premium without the policy lapsing. Reinstatement restores a policy that has already lapsed beyond the grace period, requiring an application, proof of insurability, and payment of back premiums with interest.

If the insured's age (or sex) was misstated on the application, the death benefit is adjusted to what the premium paid would have purchased at the correct age - the policy is not voided.

Cash surrender value - the owner receives the accumulated cash value in a lump sum and coverage ends, unlike extended term insurance (same face amount for a limited time) or reduced paid-up insurance (lower face amount, no more premiums).

The life income option - unlike the fixed period option (pays over a chosen number of years) or fixed amount option (pays a set dollar amount until funds are exhausted), both of which can end before the beneficiary dies.

The 7-pay test - if cumulative premiums paid in the first 7 years exceed the amount needed to pay up the policy in 7 level annual payments, it becomes a MEC and loses favorable tax treatment on withdrawals.

MEC withdrawals are taxed LIFO (gain comes out first) and may incur a 10% penalty before age 59 1/2. Non-MEC policy withdrawals are treated as basis-first, so return of premium is generally tax-free.

Allows a tax-free transfer of cash value between like-kind life insurance or annuity contracts (same owner, same insured) - contrasts with a taxable surrender, where any gain over basis is taxed as income immediately.

In a cross-purchase plan, each business owner personally buys and owns a policy on each other owner. In an entity plan, the business itself owns the policies on each owner and uses the proceeds to buy out a deceased owner's share.

Own occupation pays benefits if the insured can't perform the material duties of their own specific job (broader definition, costs more). Any occupation pays only if the insured can't work at any job suited to their training and experience (narrower, costs less).

Pays a partial benefit proportional to actual income loss when a disabled insured returns to work part-time or at reduced income, rather than requiring total disability to collect anything.

Automatically qualifies the insured for full disability benefits for specific losses (such as total blindness, or loss of both hands, feet, or hearing/speech) even if the insured could theoretically still work.

A waiting period (like a deductible measured in time) between the onset of disability and when benefit payments begin; a longer elimination period generally lowers the premium.

Treats a second disability from the same or related cause as a continuation of the first (no new elimination period) if it recurs within a specified short period after returning to work; otherwise it's treated as a new, separate claim.

Basic medical expense covers specific costs (hospital, surgical, medical) with low internal limits and usually no deductible. Major medical covers broad losses with high limits, a deductible, and coinsurance. Comprehensive major medical combines both into one policy.

After the insured meets the deductible, the insurer and insured split covered expenses by a set percentage (e.g., 80/20) until an out-of-pocket maximum is reached, after which the insurer pays 100%.

An HMO requires a primary care gatekeeper for referrals and only covers in-network care (lower cost). A PPO needs no gatekeeper and covers both in-network and out-of-network care, usually at a higher cost with more provider choice.

Under the ACA, health plans cannot deny coverage, exclude benefits, or charge higher premiums based on a preexisting condition - a major change from pre-ACA underwriting practices.

The ACA requires that dependent children be allowed to remain on a parent's health plan until age 26, regardless of marital status, student status, or financial dependency.

States that the policy and attached application (plus any riders/endorsements) make up the whole contract; the insurer cannot later rely on outside statements or materials not included in the policy to deny a claim.

After the policy has been in force for 2 years (or the state-specified period), the insurer cannot contest a claim or deny coverage based on statements made in the application, except in cases of fraud.

Standard provisions require the insured to notify the insurer of a claim within 20 days of a loss, and to submit written proof of loss within 90 days, with reasonable extensions if timely filing isn't possible.

Optionally renewable (insurer may cancel or refuse renewal on any premium due date) leads to conditionally renewable (insurer may decline renewal only for conditions stated in the policy, such as an entire class), then guaranteed renewable (must renew, but rates can rise by class), then noncancelable (must renew, and the rate is locked at issue).

Both guarantee the insurer can't cancel or refuse renewal. But guaranteed renewable allows the insurer to raise premiums for an entire class of insureds, while noncancelable locks the premium rate for the life of the contract.

A privately sold policy designed to fill the coverage gaps left by Medicare Parts A and B, such as coinsurance, copayments, and deductibles - it does not replace Medicare, it supplements it.

The number of days the insured must pay for qualifying long-term care out-of-pocket before LTC policy benefits begin - it functions like a waiting-period deductible unique to LTC coverage.

A qualified high-deductible health plan (HDHP). HSA contributions are tax-deductible, growth is tax-deferred, and withdrawals for qualified medical expenses are tax-free.

Governs licensing of insurance agents, brokers, and other producers in North Carolina, including qualifications, appointments, and license renewal.

Defines unfair trade practices and unfair methods of competition in the business of insurance, such as misrepresentation, false advertising, twisting, and rebating.

An unfair trade practice under Article 63 in which a producer misrepresents facts to induce a policyholder to replace or lapse an existing policy from ANOTHER insurer, to the client's disadvantage.

An illegal inducement under Article 63 in which a producer offers something of value beyond what's stated in the contract - such as cash, gifts, or reduced premiums - to persuade someone to buy or keep a policy.

Regulates how insurers and producers may collect, use, and disclose personal information gathered about applicants and policyholders during underwriting and claims handling.

24 hours of continuing education every 2-year license period, including 3 hours specifically on ethics, are required to keep a resident producer license active.

October 1, 2025. Prelicensing education (previously 20 hours per line, 40 hours for both) is no longer mandatory to sit for the state exam, though NCDOI and Pearson VUE still strongly recommend completing a prep course.

Sets general regulatory requirements for how life insurance business is written and conducted in North Carolina, distinct from Article 60's solicitation-specific rules.

Governs life insurance solicitation, including replacement regulations designed to protect consumers when a producer recommends replacing an existing life policy.

Contains North Carolina's general regulations governing accident and health insurance policies.

Defines the required nature, form, and mandatory content of accident and health insurance policies issued in North Carolina.

Governs group health insurance continuation and conversion rights, allowing covered individuals to continue or convert coverage after events like job loss.

Protects policyholders by covering certain claims, up to statutory limits, if a licensed life or health insurer becomes insolvent.