A CONSUMER’S GUIDE TO
LIFE INSURANCE
Life Insurance Options ........................................................................................... 1
Why Buy Life Insurance .........................................................................................1
Term Life Insurance .................................................................................................1
Permanent Life Insurance .....................................................................................2
Term Life and Permanent Life Insurance Comparisons .............................3
Standard Policy Provisions ...................................................................................4
Optional Riders ........................................................................................................5
Shopping for Life Insurance ................................................................................5
Applying for Life Insurance ..................................................................................9
Collecting Death Benets .................................................................................. 10
Before and After Your Purchase ....................................................................... 12
Frequently Asked Questions ............................................................................ 12
Consumer Services Division Information .................................................... 13
Life Insurance Needs Worksheet ..................................................................... 14
TABLE OF CONTENTS
North Carolina Department of Insurance
1201 Mail Service Center
Raleigh, NC 27699-1201
You can nd additional information as well as a downloadable copy of
our Request for Assistance form on the NCDOI Web site.
If you have questions, the Consumer Services Division of your
North Carolina Department of Insurance is here to help.
Fax: 919-733-0085Toll free: 1-855-408-1212 www.ncdoi.com
NC Department of Insurance | Mike Causey, Commissioner
GLOSSARY OF INSURANCE TERMS
EVIDENCE OF INSURABILITY
Proof that a person is an acceptable risk to the insurance company.
FACE VALUE (FACE AMOUNT)
The initial amount of death benet provided by the policy. The actual death benet may be higher or lower depending
on the options selected, outstanding policy loans or premium owed.
INSURABLE INTEREST
The likelihood that a genuine loss would occur to the beneciary/owner of a life insurance contract in the event of the
insured’s death.
LAPSE
Termination of a policy because of failure to pay the premium.
MORTALITY TABLE
A statistical table showing the probability of death at each age.
POLICY
The printed contract issued to the policyowner which sets forth and states the terms of coverage.
PREMIUM
The amount paid for an insurance policy.
REINSTATEMENT
The restoration of a lapsed policy to its original premium-paying status. The company may require evidence of
insurability and all past due premiums plus interest.
SURRENDER
Voluntary cancellation of a policy for its cash value.
SURRENDER CHARGES
Contractual charges imposed by an insurance company in the event of early policy cancellation.
UNDERWRITER
The person who reviews applications for insurance and decides if the applicant is an acceptable risk to the company.
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All life insurance is not the same. Life insurance can be divided into two basic categories — “term” and “permanent”.
Term life insurance provides coverage for a specic period of time, while permanent life insurance provides coverage
for the insured person’s entire life.
Both types pay what is known as a death benet, which is the amount of money paid out upon the insured’s death.
This money is paid to the person or persons designated by the insured. These people are known as the beneciaries.
The following pages explain the features of term and permanent life insurance policies, and also compare the two so
you can better understand what each type of coverage oers. Later in this guide you will nd a worksheet to help you
evaluate your needs and choose a policy type that meets those needs.
As always, if you have questions about the types of life insurance available, you can call the Department of Insurance
at 855-408-1212.
Whenever a loved one dies, the surviving family members face many unexpected expenses. In addition, the deceased
may have been a primary earner for his/her family, and the loss of that income can be devastating. How will the family
pay the mortgage and the car payments? Will there be enough money for the child’s college or other educational
expenses? What about credit card debt or other debts the family still has to pay?
The proceeds from a life insurance policy can go a long way towards stabilizing a family’s nances. Immediate
expenses can be covered and debts can be met. Long term nancial needs, such as educational expenses, can be
covered and mortgages can be paid o. In short, the proceeds of life insurance can help replace the deceased’s
income and provide nancial assistance to the loved ones left behind.
LIFE INSURANCE OPTIONS
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DO I REALLY NEED LIFE INSURANCE?
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Term life is the simplest form of life insurance. It provides a pure death benet. The policy will cover the insured for a
specied period of time (the “term”), such as 10 or 20 years, or until a specied age. If you purchase term life insurance
at a younger age, you can usually buy more at a lower cost.
Term insurance generally does not build a “cash value.” At the end of the term period, the policy typically terminates
without any remaining benets or monetary value.
Term insurance is ideally suited to cover specic needs that may decrease or disappear over time.
OPTIONAL TERM LIFE INSURANCE FEATURES
Following are two common provisions of term insurance policies you may wish to consider during the purchase of a
term life insurance policy.
Guaranteed Renewable Privilege — allows the insured to renew the policy without having to prove
insurability. (You do not have to be in good health.)
Conversion Privilege — guarantees the insured the right to convert a term policy to a permanent policy,
without having to prove insurability.
TERM LIFE INSURANCE
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PERMANENT LIFE INSURANCE
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TYPES OF TERM LIFE INSURANCE
There are three major types of term life insurance:
Level — The death benet stays the same throughout the policy term and premiums typically remain constant.
Increasing — The death benet increases by specic amounts and at intervals as specied in the policy. Premiums
normally increase along with the benet.
Decreasing — The death benet decreases periodically as specied by the policy. Premiums typically remain constant
throughout the policy term.
Permanent life insurance is designed to provide protection for the entire life of the insured person, as long as the
premiums are paid. There are many dierent versions and variations of permanent insurance.
FEATURES OF PERMANENT INSURANCE
Permanent insurance oers some features that are dierent than those found in term life insurance policies.
Cash Value — The cash value is an amount available to a policyowner if the policy is canceled (surrendered).
Cash value may also be used as collateral on a policy loan. Cash value generally increases over time as
premiums are paid.
Policy Loans — A policyowner may borrow an amount up to the maximum loan value of the permanent
policy. Loan interest will be charged in accordance with the policy provisions. The loan may be paid back
in a lump sum or installments. If at any point the amount of the loan plus interest exceeds the policy’s cash
surrender value, the policy may be terminated without further value. At the insured’s death, any outstanding
loan and interest will be deducted from the death benet.
Participating versus Non-Participating — Participating policies may pay dividends. Non-participating policies
do not. Dividends are refunds of the insurance company’s excess or unused premiums. Dividends are not
usually distributed until the second policy year; however, they are never guaranteed.
There are typically several available dividend options, such as:
Cash Payment — The dividend can be paid directly to the policyowner in cash.
Premium Reduction — The dividends can be used to pay part of the premium. The insurance company will
send a statement showing the amount of the dividend and balance of premium due, if any.
Interest Option (Left on Deposit) — The dividends can be left with the insurance company to earn interest. All
or part of this money may be withdrawn at any time.
One Year Term — This option allows for the purchase of one year term insurance that will be payable in
addition to the face amount of the policy.
Paid-up Additions — The dividends can be used to purchase paid-up additional life insurance.
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TYPES OF PERMANENT LIFE INSURANCE
Permanent insurance is available in a variety of forms, including:
TRADITIONAL WHOLE LIFE
This policy, sometimes called ordinary life or straight life, covers the insured for life as long as premiums are paid. This
is the most basic permanent policy. Typically, the premium remains the same throughout the life of the insured. Some
variations of these policies permit the premiums to be paid for a shorter period, such as 10 years, 20 years or until
age 65.
UNIVERSAL LIFE
Sometimes referred to as Flexible Premium Adjustable Life, this policy is more exible than a traditional whole life
policy. Premium payments may vary within certain limitations stated in the policy. For example, premium payments
may be increased, decreased or skipped altogether, as long as the policy’s accumulated value remains sucient to
keep the policy in force. Also, the death benet may be raised or lowered more easily with universal life than with a
traditional whole life policy.
Universal Life policies are interest sensitive, meaning the accumulated value earns interest. Reduced interest rates may
require additional premiums to maintain the policy in force. Make sure you understand which values are guaranteed
by the contract and which are not.
Universal life policies are appropriate for individuals who need the guarantees provided by a whole life policy, but
want the possibility of earning higher rates of interest on their policy values.
VARIABLE LIFE
Variable Life diers from traditional whole life and universal life insurance in that the policyowner chooses how to
invest the policy’s accumulated value. There are typically a variety of choices for allocating the funds, including stock,
bond, and money market accounts. The prospectus should be studied carefully, as it will describe the variable policy
and the available investment options.
In a variable life policy, the death benet and accumulated value will vary according to the amount of premiums
paid and the performance of the policyowner’s investment choices. If the chosen investments perform favorably, the
accumulated value and death benet may increase. If the investments perform poorly, the policy’s accumulated value
and death benet may decrease and possibly be lost. The policyowner bears this risk.
Some policies may have optional guarantees available for an additional premium.
TERM
• Lower initial premium outlay. At rst, you may be
able to buy more insurance for less cost than whole
life.
• May be renewable and/or convertible to whole life
insurance.
• Premium may increase each renewal.
• Coverage terminates at end of term period.
Replacement coverage may not be available due to
deteriorated health.
• Death benets only. No nonforfeiture values.
TRADITIONAL
• Guaranteed for life, if premiums paid.
• Fixed death benets and premium amount.
• Dividends and/or cash value accumulation.
• Policy loan, cash surrender, nonforfeiture options.
• Higher initial premium than other types.
• Dividends are not guaranteed.
• Cash surrender values and nonforfeiture values are
usually based on very conservative assumptions.
TERM LIFE VS. PERMANENT LIFE
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UNIVERSAL
• Flexible premiums.
• Guaranteed for life, if premiums paid.
• Flexible death benets.
• Possibility to earn higher interest rates.
• Cash surrender and policy loan options.
• Premiums may increase (subject to limitations in
the policy).
• Policyowner assumes greater risks due to policy
exibility.
VARIABLE
• Flexible premiums.
• Guaranteed for life, if premiums paid.
• Ability to choose investment options (e.g. stocks,
bonds, money market or other accounts).
• Cash surrender and policy loan options.
• Policyowner bears all the investment risk.
• Premiums may increase (subject to limitations in
the policy).
INCONTESTABILITY
Generally, after a policy has been in force for two years,
the insurance company cannot contest the validity of
the policy for any reason other than failure to pay the
premiums.
MISSTATEMENT OF AGE OR GENDER
If the applicant lists the wrong age or gender on the
policy, this provision allows the insurance company
to recalculate benets and/or premiums based on the
applicant’s true age or gender.
SUICIDE
This policy provision generally states that if a insured
commits suicide within the rst two years of the
insurance contract, the death benet is limited to the
total premiums paid.
GRACE PERIOD
After the rst premium payment, life insurance policies
provide a minimum grace period of 31 days after the
due date to make the next premium payment. If the
premium is not paid before the grace period expires,
the policy will lapse. During the grace period the
policy remains in force. If the insured dies during the
grace period, the insurance company may deduct any
premium due from the death benet.
REINSTATEMENT PROVISION
This provision allows a policy to be reinstated if for
some reason the policy has lapsed. The reinstatement is
subject to the limitations and requirements spelled out
in the policy. Generally, the insured must make written
application for reinstatement, meet the company’s
underwriting guidelines, and pay all overdue premiums
(plus interest) and reinstatement fees.
NONFORFEITURE BENEFITS
The following nonforfeiture benets may be available if
a policy lapses due to non-payment of premiums.
• Reduced Paid-up Insurance — This option allows
the insured to receive reduced paid-up life
insurance coverage.
• Extended Term — This option allows the
policyowner to keep the policy in force, as term
life coverage, to a specied future date. The length
of the extended term benet will depend on the
amount of cash value in the policy and the age of
the insured.
• Cash Surrender — The owner may elect to take the
available cash value in a lump sum.
AUTOMATIC PREMIUM LOAN
This provision requires the company to collect past due
premiums by means of a policy loan. This prevents the
policy from lapsing provided the available loan value
is sucient to pay the premium. In most cases the
policyowner must choose to enact this provision
STANDARD POLICY PROVISIONS
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OPTIONAL RIDERS
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ACCIDENTAL DEATH BENEFITS
Sometimes known as “double indemnity” or “triple
indemnity,” this rider increases the death benet paid if
the insured dies as a result of a specic type of accident
dened in the policy.
DEPENDENT CHILDREN RIDER
This rider generally provides level term coverage for
your dependent children up to a stated age. The rider
may also allow each child to convert the policy to a
whole life policy (without having to show evidence of
insurability).
DISABILITY INCOME RIDER
This rider provides a monthly income if the insured
becomes disabled.
GUARANTEED INSURABILITY
The insured is guaranteed the right to purchase
additional life insurance on specied dates. The rates
will be based on the attained age of the insured.
LEVEL TERM RIDER
This rider provides extra term life insurance protection
for a specic amount of time.
LONG TERM CARE RIDER
This rider pays benets if the insured meets dened
policy eligibility criteria (e.g. conned to a long term
care facility). The maximum benet is generally a
percentage of the life insurance policy’s face amount.
The death benet will be reduced by the amount paid
out under this rider.
MORTGAGE PROTECTION
This rider provides an additional decreasing term
life insurance benet, for the length of the insured’s
mortgage.
SPOUSE RIDER
This rider provides life insurance coverage for the
insured’s spouse.
WAIVER OF PREMIUM
If the insured becomes disabled, as dened in the
policy, the insurance company pays the premium (or
cost of insurance) during the disability period.
Optional Riders (or Endorsements) are provisions added to the original policy to either expand or limit coverage.
Typically, riders are purchased by the policyowner to add benets not included in the original policy. Ask your agent
which riders are available with the policy you are considering. Listed are some examples:.
It is important to use care when shopping for life insurance. The cost of insurance over the life of the policy can be
signicant and the benets provided may be extremely important to your survivors. You should determine just what
you need and then shop around so you can select a product that meets those needs at an aordable and competitive
premium.
The rst step in choosing life insurance is to decide how much coverage you need, how much you can aord to pay
in premiums, and the type of policy that best meets your needs. Secondly, compare products oered by various
companies, noting dierences in benets and costs. You can compare dierences in the cost of life insurance by using
the life insurance cost indexes described in this guide. Much of this shopping and comparing can be done on the
internet, and/or by contacting life insurance companies and agents. You can also contact the Department of Insurance
if you have any questions.
SHOPPING FOR LIFE INSURANCE
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DECIDE HOW MUCH INSURANCE YOU NEED
One way to decide how much life insurance you need is to gure how much cash and income your dependents will
need when you die. Instead of receiving the paycheck or other income that you would normally bring home, upon
your death, your family will receive an insurance benet. It is up to the beneciary or beneciaries to decide how
to use the policy’s death benet. Tools that can help you decide how much insurance is needed can be found on
insurance company and other nancial websites, in insurance publications, etc. Life insurance agents can help with
this as well.
DETERMINE WHICH TYPE OF INSURANCE IS RIGHT FOR YOU
Carefully review the types of life insurance described earlier in this guide, and talk to your insurance agent or company
for more information about the specic products they oer. If you still have questions, you can call the Department of
Insurance at 855-408-1212.
WHERE TO SHOP
You may already have an insurance agent you trust; if so, you may want to start there.
If you don’t have an agent already, you may want to see who is advertising in your area. Companies and agents often
advertise in telephone directories, in the newspaper, on the radio or television or on the internet. These may be good
starting points in your search.
When you’ve settled on an agent, make sure he or she is properly licensed to sell insurance in North Carolina. You can
check on an agent by calling the Department’s Agent Services Division at 855-408-1212. Most agents are reputable
professionals who are well trained in their area of expertise. Choose one with whom you feel comfortable and who will
answer your questions fully and without rushing you to make a decision.
As with any major purchase, it is recommended that you shop around to make sure you get the most for your money
and to make sure you use a company you can trust. Companies must be licensed to conduct business in North
Carolina. To verify that a company is properly licensed, you may contact the North Carolina Department of Insurance
Consumer Services Division at 855-408-1212.
LEARN AS MUCH AS YOU CAN
Because purchasing life insurance is an important nancial decision, you should seek as much unbiased information
as you can before you make a decision. Information is available to consumers from a number of sources. These sources
include consumer publications, public libraries, consumer groups and your Department of Insurance.
The Department of Insurance does not rate or recommend insurance companies, but we can give you information
about the company’s license, how long it has been in business and whether it has any complaints against it.
You should also consider checking the nancial ratings published by independent organizations such as A.M. Best,
Standard & Poor’s, Moody’s Investors Service and others. These groups can tell you about the company’s nancial
strength, which is an important consideration when choosing a life insurance company. You should consider checking
with at least two organizations to evaluate a company’s strength. The ratings for insurers can be found in most public
libraries, by asking your agent or on the Internet. (NOTE: These agencies rate companies according to their present
nancial ability to pay claims, not by the quality of products oered or by past or future ability to pay claims.)
POLICY ILLUSTRATIONS
Life insurance agents and companies may use something called a policy illustration that will show details of the policy
you are considering, such as death benets, cash values, dividends, etc. Some of these details may not guaranteed, but
are based on some basic assumptions the company makes about the policy’s future performance. You can use these
illustrations to help you compare products as you comparison shop.
Ask your agent to explain which gures are guaranteed and which are not. It is important to note that an illustration is
only used to help you make a decision; it is not a policy.
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Past policy performance is no guarantee of future policy performance. For this reason, it is generally not a good idea to
buy a life insurance policy based solely on projected (non-guaranteed) future values.
Remember, interest rates and costs are subject to change. Make sure you receive the complete sales illustration and
copies of all materials used by the agent in the sales presentation, including those that show guaranteed values. If the
agent uses a computer to show you the illustration, make sure you get a printed copy to keep.
Here are additional questions to ask about the policy illustration:
• Is the illustration up to date? Is it based on realistic assumptions?
• Is the classication shown in the illustration appropriate for me (i.e. smoker/non-smoker, correct age and gender)?
• Which gures are guaranteed and which are not?
• Can the death benet change due to changing interest rates or other factors?
• Are dividends (if the policy is participating) incorporated into the illustration?
• Can my out of pocket premium cost uctuate?
• If the illustration indicates that my out of pocket premium may “vanish,” is it guaranteed that no additional out-of-
pocket premiums will be necessary to keep the policy in-force”?
“VANISHING” PREMIUMS
Some whole life policies may provide a “vanishing premium” option. This means that if your policy accumulates
enough cash value, you may be able to stop paying premiums out of your own pocket. Generally, this option is not
guaranteed. Speak to your agent or company for an explanation of how vanishing premiums could work for the policy
you are considering.
LIFE INSURANCE COST INDEXES
After you have decided which kind of life insurance ts your needs, shop for a good buy. Hundreds of life insurance
companies are licensed to sell insurance in North Carolina — that’s a lot of comparison shopping! Fortunately,
insurance companies are required to provide you with numbers to help you compare products and costs. These
numbers make up the Surrender Cost Index and the Net Payment Cost Index. Using these indexes can help you nd a
good buy.
You should use these cost indexes only for comparing products that are similar. You can nd the indexes in the policy
summaries provided by the insurance company. LOOK FOR POLICIES WITH LOW COST INDEX NUMBERS.
In order to compare the relative cost of similar policies, you should consider:
• Premiums
• Cash values
• Dividends
Cost indexes use one or more of these factors to give you a convenient way to make such comparisons. When you
compare costs, an adjustment must be made to take into account that money is paid and received at dierent times.
It is not enough to just add up the premiums you will pay and to subtract the cash values and dividends you expect
to get back. These indexes take care of the math for you. Instead of having to add, subtract, multiply and divide many
numbers yourself, you just compare the index numbers.
LIFE INSURANCE SURRENDER COST INDEX
If the cash value of a policy is most important to you, this is the index to use. It helps you compare the costs of similar
policies that you plan to surrender for cash value at some future point in time, such as in 10 or 20 years.
LIFE INSURANCE NET PAYMENT COST INDEX
This index is useful if your main concern is about the policy’s death benet rather than its cash value. It helps you
compare the costs, at some future point in time, of similar policies for which you plan to keep rather than surrender.
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The Equivalent Level Annual Dividend is another statistic that can be useful in comparing similar policies. As explained
earlier, a “participating” policy pays a dividend, while a “non-participating” policy does not. For a participating policy,
the Equivalent Level Annual Dividend shows the dividend’s eect on the policy’s cost index. Adding the policy’s
Equivalent Level Annual Dividend to its cost index allows you to more accurately compare the total costs of similar
policies before subtracting dividends. If you compare a participating policy with a nonparticipating policy, though,
remember that the total cost of the participating policy will be reduced by the dividends, but the cost of the
nonparticipating policy will not change.
HOW DO I USE COST INDEXES?
The most important thing to remember when using cost indexes is that a policy with a small index number is
generally a better buy than a comparable policy with a larger index number. The following rules are also important:
• Cost comparisons should only be made between similar plans of life insurance. Similar plans provide essentially
the same basic benets and require premium payments for approximately the same period of time. The closer
policies are to being identical, the more reliable the cost comparison will be.
• No one company oers the lowest cost for all types of insurance at all ages and for all amounts of insurance. It is
important to get the indexes for the actual policy, insured age and amount which you intend to buy. Just because
a “shopper’s guide” tells you that one company’s policy is a good buy for a particular age and amount, you should
not assume that all policies oered by the company are equally good buys.
• The indexes aren’t the only thing you should consider. Just because a company has a slightly lower cost index
than another may not mean it’s the best buy for you. Also consider such things as other policy features and
the customer service you can expect from the company. These other considerations may make up for a small
dierence in indexes.
• Life insurance cost indexes apply to new policies and should not be used to determine whether you should cancel
a policy you already have.
SHOULD I CHANGE OR CANCEL MY POLICY?
Be careful when deciding whether or not to replace current life insurance. Ask for and obtain comparison information
from both your existing agent/company as well as the new agent/company.
Remember, proceed cautiously when considering replacing existing life insurance, and weigh the advantages and
disadvantages prior to replacement.
ADVANTAGES
• The replacement policy’s premium rate may be lower.
• The replacement policy’s guaranteed values, current interest and dividend scales may be higher.
• The face amount of the proposed policy may be greater.
• The replacement policy’s settlement options may be more favorable.
• The replacing company may be more nancially sound than your current insurance company.
DISADVANTAGES
• Cash value in a new permanent policy may build at a slower rate than in an existing permanent policy that has
already been in force
• A replacement policy may be subjected to a new incontestability period of up to two years.
• The replacement policy may contain additional early surrender penalties.
• Federal and state tax liability may be incurred.
REMEMBER
• Carefully compare the terms of existing coverage with the terms of the replacing coverage.
• Replacing your insurance without careful review and analysis may be very costly.
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WHAT IS CONSIDERED A REPLACEMENT POLICY?
A replacement policy is basically any new life insurance policy that you purchase because an old policy has already or
is about to
• lapse or be terminated
• be forfeited
• be surrendered
All life insurance replacements must comply with North Carolina replacement laws except:
• credit life insurance policies;
• group life insurance policies;
• life insurance that is issued in connection with a pension, prot sharing or other benet plan qualifying for tax
deductibility; and
• life insurance policies where the replacing insurance company is the same company or under common ownership.
North Carolina law requires the agent or company to give you a “Notice Regarding Replacement” of life insurance. This
notice should be reviewed when considering replacement. The agent writing the new policy is required to complete
the replacement notice that is sent to your current company advising them of possible replacement.
If you have questions, contact the North Carolina Department of Insurance for assistance.
Once you select a specic life insurance policy, the rst step in securing coverage is to complete and submit
an application. Most policy applications require you to furnish detailed personal and medical information. The
information is reviewed by the company, to determine whether you meet their guidelines. They will consider all of the
information on your application and possibly details from medical exams or tests, so it is extremely important that all
application questions are answered fully and accurately. Your application will become part of your policy contract, and
any inaccurate or incomplete responses could lead to your policy being terminated or a claim being denied.
CHOOSING YOUR BENEFICIARY
When you ll out the application for life insurance, the company will usually ask you to choose a beneciary. This is the
person to whom the benets will be paid upon your death. A beneciary is most often a close family member, though
non-family members, estates, trusts, etc., can also be designated. The beneciary can usually be changed later at the
request of the policyowner.
FACTORS THAT INFLUENCE PREMIUM RATES
Life insurance premiums can vary from company to company. Several factors will inuence your premium rates. The
factors may include:
• Amount of coverage
• Type of coverage
• Age and gender
• Health and lifestyle (tobacco use, alcohol use, regular exercise, good driving record, etc.)
• Dangerous activities (skydiving, scuba diving, motor vehicle racing, rock climbing, etc.)
• Family medical history (heart disease, cancer, etc.)
APPLYING FOR LIFE INSURANCE
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In order to process a death claim, most companies require a properly completed claim form, a certied copy of the
insured’s death certicate and the policy contract. If the policy has been lost, the company will typically require the
beneciary to complete a lost policy certication.
If the insured dies during the contestable period or from accidental or unusual means, the company may require
additional documentation such as police reports, autopsy reports or medical records. Once the company receives
satisfactory proof of loss, it has 30 days to pay the claim before interest will start to accrue.
SETTLEMENT OPTIONS
Once a claim is approved, the beneciary may have a choice of several ways to receive death benets. The most
common settlement options are:
LUMP SUM
The company sends the beneciary a check for the full amount of death benet.
RETAINED ASSET ACCOUNT
The company places the benet in an interest bearing checking or draft account from which the beneciary can
withdraw the funds (partially or in total) at any time.
INTEREST INCOME
The insurance company holds the death benet on deposit for the beneciary. Interest accumulates on the funds in
accordance with policy guarantees and/or excess rates declared by the company. The beneciary is able to withdraw
the money at any time.
FIXED AMOUNT
Equal payments are periodically paid to the beneciary until all benets have been exhausted. Interest accumulates
on the unpaid balance.
FIXED PERIOD
Equal payments are made to the beneciary over a specied period of time. Interest accumulates on the unpaid
balance.
LIFE INCOME
Proceeds (calculated and based on the beneciary’s life expectancy) are paid to the beneciary in equal payments for
life. A guaranteed amount of payments may be established.
COLLECTING DEATH BENEFITS
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NORTH CAROLINA LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION
To protect North Carolina insureds against company insolvencies, the North Carolina General
Assembly created the North Carolina Life and Health Guaranty Association. The Guaranty Association
provides up to $300,000 of benets per person (for guaranteed policy benets) on covered policies in
the unlikely event of insurer insolvency. The association is funded by insurers licensed to do business
in North Carolina.
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Accelerated Benets, sometimes referred to as “living benets,” is a policy provision that provides life insurance
benets to insureds diagnosed with terminal illnesses. Depending on the contract, other qualifying events may also
trigger benets, such as being permanently conned to a nursing home or requiring an organ transplant. Qualifying
events can dier from contract to contract. The policy may limit the amount that can be paid.
The policyowner may have to pay an additional premium for this benet. Also, any amounts paid will generally reduce
the death benet paid to the beneciary.
If you accept an accelerated benet payment, you may become ineligible for Medicaid or other governmental
benets. Also, the benets may be taxable. We suggest that you consult with your legal and nancial advisors to
determine whether or not this may be the case in your individual situation.
WHAT IF I NEED THE MONEY NOW?
Accelerated Benets, sometimes referred to as “living benets,” is a policy provision that provides life
insurance benets to insureds diagnosed with terminal illnesses. Depending on the contract, other
qualifying events may also trigger benets, such as being permanently conned to a nursing home
or requiring an organ transplant. Qualifying events can dier from contract to contract. The policy
may limit the amount that can be paid.
The policyowner may have to pay an additional premium for this benet. Also, any amounts paid will
generally reduce the death benet paid to the beneciary.
If you accept an accelerated benet payment, you may become ineligible for Medicaid or other
governmental benets. Also, the benets may be taxable. We suggest that you consult with your
legal and nancial advisors to determine whether or not this may be the case in your individual
situation.
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BEFORE YOU BUY
• Shop around. Compare plans from more than one
company. Do not feel pressured to make a quick
decision. Life insurance is a long-term contract.
• Verify that the agent and company you choose to
do business with are licensed in North Carolina.
• DO NOT PAY CASH. When you purchase a policy,
make your check or money order payable to the
insurance company, NOT THE AGENT. Be sure to get
a receipt.
• Make sure you fully understand any policy you are
considering and that you are comfortable with the
company, agent and product.
• Ask questions. Your life insurance policy represents
a considerable investment and may signicantly
impact your family’s future.
• Determine the dierence between guaranteed
values and non-guaranteed projections.
• Ask your accountant about any potential tax
consequences.
• Can you aord the initial premium? Buy only the
amount of life insurance you need and can aord.
If the premium increases later, can you still aord
it? It may be very costly if you quit during the early
years of the policy.
• Do not sign an insurance application until you
review it carefully to be sure all the answers are
complete and accurate.
AFTER THE PURCHASE
• Keep in mind that you have a minimum 10-day
“free look” period on new policies and a minimum
20 day “free look” period on replacement policies,
in case you change your mind. If you cancel during
the free look period, the company must return your
premium without penalty.
• Periodically review your policy to make sure it
continues to meet your insurance needs.
• Provide your beneciaries with your agent’s name
and a photocopy of your policy.
• Tell your beneciaries where your policies are
located.
• Your life insurance policy should be kept in a safe
place with your other important documents, such
as a safe deposit box or re proof safe. The name
of the company and policy number should be kept
in a safe place (at a separate location from your
original policy) in case the policy is misplaced or
lost.
• Make sure the insurance company always has your
current address.
What does “free look” mean?
“Free look” is the period of time following policy delivery in which the applicant can return the policy for a full refund
of premium.
Can an insurance company void my policy if I made a mistake in completing the application?
Life insurance contracts may be voided within the rst two years (the “incontestability period”) if the applicant
provides incorrect answers to the application questions and the company’s decision to issue the policy was based
on the misrepresentations. Always verify that answers and information submitted on any application for insurance is
complete and accurate.
Does a life insurance policy contain a premium grace period?
Yes. Life insurance policies provide a minimum 31-day grace period for premium payments.
Is an insurance company required to pay the death benets if the insured person commits suicide?
Generally, a life insurance policy limits death benets to the amount of premiums paid if the insured person commits
suicide during the rst two years. After the initial two years, the benets should not be aected
BEFORE & AFTER YOUR PURCHASE
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FREQUENTLY ASKED QUESTIONS
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I purchased a life insurance policy in another state. Do North Carolina insurance laws apply?
No. The laws and regulations of the state of issue apply. North Carolina law applies only to policies applied for and
issued in North Carolina.
Is a company required to pay interest on death benets?
North Carolina law requires insurance companies to pay interest if the death proceeds are not paid in accordance with
the terms of the policy within 30 days after the receipt of satisfactory proof of loss.
What rights does the designated policyowner have?
The policyowner has full legal right to all policy values and to make policy changes during the lifetime of the insured.
What rights does the designated beneciary have?
The named beneciary is entitled to receive death proceeds upon the death of the insured person.
Will outstanding loans reduce death benets payable to the beneciary?
Yes.
The Consumer Services Division strives to respond promptly, clearly and courteously to consumers’ insurance-related
questions and complaints., in an eort to help consumers understand their options and resolve their insurance
problems. If you have a problem or concern with an insurance company or agent, the North Carolina Department of
Insurance stands ready to assist you.
The North Carolina Department of Insurance pledges to seek fair and equitable treatment of all parties in insurance
transactions.
NCDOI CONSUMER SERVICES
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WHAT WE CAN DO TO HELP
• Forward a copy of your complaint to your insurance
company, and require the company to provide a
response/explanation.
• Review the company’s response for compliance
with applicable North Carolina statutes,
regulations, and policy requirements.
• Require the company to take corrective action if we
determine that the company’s position does not
comply with applicable requirements.
• Help you understand your insurance policy.
• Recommend courses of action that you can take
to resolve your problem, if we do not have the
regulatory authority to resolve it ourselves.
• If your situation involves a health plan’s
noncertication decision (denial based on lack of
medical necessity), refer you to the Department
of Insurance’s Healthcare Review Program (HCR
Program), for further guidance.
WHAT WE CANNOT DO
• Act as your legal representative in or out of court.
• Intervene in a pending lawsuit, on your behalf.
• Consult with you if you are represented by an
attorney, unless we have your attorney’s written
permission.
• Regarding a dispute between you and your
insurance company, establish:
• Who was negligent or at fault.
• The value of a claim or the amount of money owed
to you.
• The facts surrounding the claim (that is, who is
being truthful when there are diering accounts of
what happened).
• The facts regarding any other disagreement
between you and another party.
• Address plans or companies that are not subject
to the insurance laws of North Carolina, or that are
governed by other state agencies.
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EXPENSES
IMMEDIATE EXPENSES
Federal and State Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __________________
Funeral costs ............................................................................. __________________
Medical expenses ........................................................................ __________________
Estate settlement ........................................................................ __________________
FUTURE EXPENSES
Credit card debt ......................................................................... __________________
Child care ................................................................................ __________________
Education expenses (private school, college fund). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __________________
Housing (mortgage, rent, utilities, etc.) .................................................... __________________
Other loans and debts ................................................................... __________________
Taxes (local, state, property, income, other) ............................................... __________________
Transportation ........................................................................... __________________
Miscellaneous ........................................................................... __________________
TOTAL EXPENSES ................................................................... $ __________________
ASSETS
Checking and savings accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __________________
Emergency fund ......................................................................... __________________
Insured’s benets (social security, veterans, pension, trust income, etc.) .................... __________________
Investments (stocks, bonds, mutual funds) ................................................ __________________
Life insurance death benet .............................................................. __________________
Money market accounts and certicates of deposit ....................................... __________________
Mortgage insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __________________
Real estate (home and business) .......................................................... __________________
Retirement plans (IRA, Keogh, pension and dened-contribution plans) ................... __________________
Miscellaneous (jewelry, art, furs, etc.) ..................................................... __________________
TOTAL ASSETS ...................................................................... $ __________________
ADDITIONAL INSURANCE YOU MAY NEED (EXPENSES MINUS ASSETS) ................ $$ __________________
LIFE INSURANCE NEEDS WORKSHEET
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