The national guide covers insurable interest, underwriting and policy delivery in general. Texas adds its own insurable interest and consent rules (TIC Chapter 1103) and regulates life settlements (TIC Chapter 1111A). This guide covers those.

Insurable interest and consent (TIC 1103)

• Insurable interest is tested when the policy is applied for (1103.053).
  • Once a beneficiary or owner is properly designated, that person has an insurable interest from then on.
  • A policy without insurable interest at inception is against public policy.
• Everyone has an insurable interest in their own life (1103.054).
• A for-profit corporation may be the beneficiary of a policy on an officer or stockholder (1103.003).
• A business that buries the dead has no insurable interest just because of that business (1103.053(b)).
• An adult may consent in writing, in a single document, to a third party buying a policy on their life (1103.056).
• An irrevocable beneficiary has a vested interest. The owner can't change the beneficiary or use the cash value without that person's consent (1103.055).

Consideration and statements

• The applicant's consideration is the application plus the first premium (1101.003).
• Absent fraud, statements are representations. A material misrepresentation is one that would affect underwriting (1101.007).

Life settlements (TIC 1111A)

• A life settlement is the sale of an existing policy to a third party for a lump sum less than the face amount (1111A.002).
• The owner may rescind the settlement within 15 days after all parties sign it (1111A.012).
• The provider notifies the insurer within 20 days after the owner signs (1111A.014).
• Stranger-originated life insurance (STOLI) is a prohibited fraudulent life settlement act. That's buying a policy for the purpose of settling it (1111A.017). So is claiming coverage is "free" for any period.
• A life agent licensed at least 1 year may act as a settlement broker. The agent must notify the Commissioner within 30 days of first acting as one (1111A.003).

Proceeds held in trust

A trustee who receives policy proceeds may commingle them with other trust assets (1104.024). This rule is about trustees. An agent who misuses premium faces discipline under 4005.101(b)(4).

Common exam traps

• Insurable interest is required at application.
• A third-party purchase needs the insured's written consent.
• Life settlement rescission: 15 days.
• STOLI is prohibited.
• 1104.024 is about trustees, not agent commingling.