Glossary of Insurance Related Terms

National Association of Insurance Commissioners (NAIC)

In the United States, an association of state insurance commissioners designed to promote consistent insurance regulation. Although the NAIC has no legal power, the recommendations of the NAIC and the actions taken at its semiannual meetings carry great weight with the individual state insurance commissioners, the state legislatures, and the insurance industry. Similar to the Canadian Council of Insurance Regulators (CCIR) in Canada.

National Association of Life Companies (NALC)

A voluntary association of smaller and newer companies for exchange of information and ideas. (LI,H)

National Association of Life Underwriters (NALU)

An association of Life Insurance agents, the activities of which center on the welfare and education of agents and legislation affecting agents. (LI,H)

National Association of Securities Dealers (NASD)

A voluntary association of securities firms empowered by the Maloney Act of 1938 to regulate the affairs of securities firms and to promote fair and ethical practices in the securities business.

National Fraternal Congress of America

A federation of fraternal benefit societies. (LI,H)

National Service Life Insurance (NSLI)

Life Insurance made available by the federal government for members of the United States armed forces from 1940 to 1951. (LI)

Natural Premium

The pure mortality cost of Life Insurance for one year at any given age.

Needs analysis

Part of the fact-finding stage in the personal selling process; the process of developing a detailed personal and financial picture of a prospect in order to evaluate his or her insurance needs.

Net Amount At Risk

A term which refers to the differences between the face amount of a policy and the reserve or cash value which has been built up under that policy. (LI)

Net Cost

The out-of-pocket cost of owning any particular life insurance policy.

Net Increase

The increase in the total amount of business an insurer has to force over a given period of time. It is figured as the total of new policies issued plus those renewed less policies lapsed and cancelled. (LI)

Net Level Premium

The pure mortality cost of a Life Insurance policy from its inception to its maturity date, divided by the number of years the policy is to be in force.

Net Level Premium Reserve

The reserve needed by an insurer to cover net level policies which are in their later years. Loosely speaking, the level premium system of paying for a long-term Life or Health policy involves overpayment in the early years and underpayment in the later years. (LI,H)

Net Rate

(1) See the third definition of Net Premium for the definition applicable to participating Life Insurance policies. (2) In a nonparticipating policy, the rate book rate. (LI)

Net Worth

Total assets minus total liabilities of an individual or company.

Non-Contributory

A term applied to employee benefit plans under which the employer bears the full cost of the benefits for the employees. One hundred percent of the eligible employees must be insured.

Non-Medical Insurance (Non-Med)

Life insurance issued based on the insured's statement of health with no medical examination required.

Non-Medical Limit

The maximum face value of a policy that a given company will issue without the applicant taking a medical examination.

Non-Tobacco Status

No cigarette or tobacco usage based upon company guidelines.

Noncontributory group insurance

A group insurance plan in which the insureds pay no portion of the premium for their insurance. The group policyholder pays the entire premium. If a group plan is noncontributory, the enrollment of group members is automatic; all eligible group members are covered.

Nonforfeiture factors

Special values, similar to annual premiums, that some insurers use to calculate their policies’ cash values. Each insurer calculates its own nonforfeiture factor. In the United States, the nonforfeiture factor can never be greater than the adjusted premiums required by the Standard Nonforfeiture Law.

Nonforfeiture options

The various ways in which a policyowner may apply the cash value of a life insurance policy if the policy lapses.

Nonforfeiture values

The benefits, as printed in a life insurance policy, that the insurer guarantees to the policyowner if the policyowner stops paying premiums. These amounts may be used in a variety of nonforfeiture options.

Nonmedical (Non-Med)

A contract of Life or Health Insurance underwritten on the basis of an insured's statement of his health with no medical examination required. (LI,H)

Nonmedical application

An application for insurance in which the proposed insured is not required to undergo a medical examination. However, a nonmedical application does contain questions that the proposed insured must answer about his or her health.

Nonparticipating policy

A life insurance policy for which the policyowner does not share in the insurer’s surplus through policy dividends.

Nonresident Agent

An agent licensed to write insurance in a state in which he or she does not live.

Nonsmoker risk class

An underwriting risk class that includes people who are standard risks and who have not smoked cigarettes for a specified period of time, usually 12 months, before applying for insurance. People in the nonsmoker risk class pay lower than standard premiums.

Numerical Rating

An underwriting method of determining the extra rate to be charged for a substandard insured. "Standard" is rated 100. Various impairments are assigned various numerical values. The sum of 100 plus the values of the ratings of the impairments indicates the table to use in determining the rate of the policy. (LI)