Texas sets the required provisions for individual life policies in TIC 1101.003 to 1101.012. The prohibited provisions are in 1101.053 to 1101.055, the TDI checklist rules in 28 TAC 3.101 to 3.125, and replacement rules in TIC Chapter 1114. The national guide covers the provisions, options and riders in general. This guide gives the Texas versions.

Required provisions

Prohibited provisions

• Limiting the time to sue to less than 2 years after the cause of action accrues (1101.053).

• Backdating more than 6 months before the application to get a younger age (1101.054).

• Reduced settlements, except for (1101.055; 28 TAC 3.121):

  • suicide, sane or insane
  • a hazardous occupation named in the policy
  • specified aviation activities

  Exclusions must be based on the cause of death. Status clauses are prohibited.

• Texas law doesn't require a suicide exclusion, and it doesn't set a maximum suicide-exclusion period.

Nonforfeiture (TIC 1105.004)

• A cash surrender value is available after 3 full years' premiums (5 for industrial).
• The owner elects an option within 60 days after the due date of the defaulted premium. Otherwise, the policy's default option applies.
• The insurer may defer paying the cash value for 6 months.
• An automatic premium loan isn't a nonforfeiture value, and the owner must be able to revoke it (28 TAC 3.109).

Accelerated benefits (TIC 1111.052)

• Paid on a medical opinion of a terminal illness, a long-term care illness, or a condition likely to cause permanent disability or premature death. Examples include an organ transplant or certain heart disease.
• The payment reduces the death benefit and any convertible amount.

Replacement (TIC Chapter 1114)

• Every application includes a statement, signed by applicant and agent, about existing coverage (1114.051).
• The agent's duties:
  • read the replacement notice aloud, unless the applicant declines
  • have both people sign it
  • leave the notice and all sales material with the applicant
• The replacing insurer gives a 30-day right to return the new policy (1114.053).
• A same-company replacement must credit the time already served under the old incontestability and suicide periods.
• The existing insurer sends an in-force illustration or policy summary within 5 business days (1114.054).
• Penalties for telling an applicant to answer replacement questions falsely include license action, penalties and forfeited commissions (1114.101, 1114.102).

Illustrations and advertising

• Illustrations are labeled "Life Insurance Illustration" and separate guaranteed from nonguaranteed values (28 TAC 21.2206).
• An annual report goes to the policyowner (21.2210).
• Ads may not call life insurance "savings" or an "investment" (21.114).
• "Non-medical" ads must disclose that issue depends on the application answers.

Free look

The Insurance Code doesn't set a general free-look period for individual life policies. TDI's consumer life insurance guide describes a free look of 10 to 20 days, starting from delivery. A replacement policy has a 30-day return right by statute.

Common exam traps

• Grace period: one month or 31 days.
• Incontestability exception: nonpayment. There's no fraud exception.
• Suits can't be limited to less than 2 years. Backdating can't exceed 6 months.
• Policy loans start after 3 years and can be deferred 6 months.
• Death claims are paid within 2 months of proof.
• Replacement free look: 30 days.