CHAPTER 1101. LIFE INSURANCE - Texas Statutes

INSURANCE CODE

TITLE 7. LIFE INSURANCE AND ANNUITIES

SUBTITLE A. LIFE INSURANCE IN GENERAL

CHAPTER 1101. LIFE INSURANCE

SUBCHAPTER A. REQUIRED POLICY PROVISIONS

Sec. 1101.001. APPLICABILITY OF SUBCHAPTER. This subchapter

applies to a life insurance policy:

(1) issued or delivered in this state; or

(2) issued by a life insurance company organized under the laws

of this state.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.002. POLICY PROVISIONS REQUIRED. (a) Except as

provided by this section, a life insurance policy must contain

provisions that are substantially the same as the provisions

required by this subchapter.

(b) A single premium life insurance policy is not required to

contain a provision under this subchapter to the extent that the

provision is not applicable to a single premium insurance policy.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.003. ENTIRE CONTRACT. A life insurance policy must

provide that the policy or the policy and the application for the

policy constitute the entire contract between the parties.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.204(a),

(b), eff. Sept. 1, 2003.

Sec. 1101.004. PREMIUMS PAYABLE IN ADVANCE. A life insurance

policy must provide that all premiums are payable in advance at

the home office of the company that issues the policy or to an

agent of the company on delivery of a receipt signed by at least

one of the company officers designated in the policy.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.005. GRACE PERIOD. (a) Except as provided by

Subsection (b), a life insurance policy:

(1) must contain a provision for a grace period of at least one

month for the payment of each premium after the first payment

during which the policy remains in force; and

(2) may:

(A) provide for an interest charge on a premium paid during a

grace period; or

(B) provide that if an insured dies during a grace period the

overdue premium will be deducted from any settlement made under

the policy.

(b) The commissioner by rule may require a life insurance policy

issued under Section 884.402(3) to contain a grace period that is

longer than the grace period required by this section.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.006. INCONTESTABILITY. (a) Except as provided by

Subsection (b), a life insurance policy must provide that a

policy in force for two years from its date of issue during the

lifetime of the insured is incontestable, except for nonpayment

of premiums.

(b) At the option of the company, a life insurance policy may

provide that the policy may be contested at any time for

violation of policy conditions relating to naval and military

service in a time of war.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.007. STATEMENTS OF INSURED. A life insurance policy

must provide that, in the absence of fraud, a statement made by

an insured is considered a representation and not a warranty.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.008. ADJUSTMENT OF AMOUNT PAYABLE IF AGE OF INSURED IS

UNDERSTATED. A life insurance policy must provide that if the

age of an insured has been understated, the amount payable under

the policy is the amount that the premium paid would have

purchased if the insured's age had been stated correctly.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.009. POLICY LOANS. (a) The following policies are

not required to comply with this section:

(1) a term life insurance policy;

(2) a pure endowment contract issued or granted:

(A) as an original contract; or

(B) in exchange for a lapsed or surrendered policy; or

(3) a policy that does not provide for cash values or

nonforfeiture values and that meets the requirements of Section

884.403(b).

(b) A life insurance policy must provide that the company that

issues the policy will loan to the policy owner at a specified

interest rate an amount equal to the sum of the policy's cash

value and any dividend additions to the policy, or, at the policy

owner's option, an amount less than that sum, if:

(1) the policy is in force;

(2) the premiums for the policy have been paid for at least

three full years; and

(3) the policy is properly assigned.

(c) A life insurance policy must also provide that:

(1) a policy loan is secured only by the policy;

(2) the company may deduct from a policy loan the sum of the

amount of existing debt on the policy and the balance of unpaid

premiums for the current policy year;

(3) the company may collect in advance interest on the policy

loan to the end of the current policy year; and

(4) failure to repay the policy loan or interest on the loan

does not void the policy until the total amount owed under the

loan equals or exceeds the policy's cash value.

(d) A life insurance policy may provide that a policy loan may

be deferred for a period not to exceed six months after the date

the application for the loan is made.

(e) A life insurance policy may not require a prerequisite to a

policy loan if the prerequisite is not required or authorized by

this section.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.010. NONFORFEITURE BENEFITS AND CASH SURRENDER VALUES

IN GENERAL. A life insurance policy must provide nonforfeiture

benefits, including cash surrender values, in accordance with:

(1) Subchapter D; or

(2) Chapter 1105, for a policy issued on or after the date

determined under Section 1105.002(a) or (b), as applicable.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.011. TIME FOR SETTLEMENT OF CLAIM. (a) Except as

provided by Subsection (b), a life insurance policy must provide

that settlement under the policy after the death of the insured

will be made not later than two months after the date of receipt

of proof of:

(1) the death; and

(2) the right of the claimant to the proceeds of the policy.

(b) A private placement contract issued under Section 1152.110

may provide that:

(1) settlement of that portion of the contract attributable to

separate account assets is subject to the liquidity of those

assets; and

(2) the portion of the contract described by Subdivision (1)

must be settled by the insurer when the separate account assets

are converted to cash under any applicable terms, which may be a

period longer than the two-month period described by Subsection

(a).

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

737, Sec. 2, eff. September 1, 2007.

Sec. 1101.012. TABLE OF INSTALLMENTS OF PROCEEDS. A life

insurance policy that provides that the policy proceeds are

payable in installments must include a table that shows the

amount of the installments.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.013. STATEMENT OF MAXIMUM AMOUNT PAYABLE UNDER FAMILY

GROUP LIFE INSURANCE POLICY. A family group life insurance

policy must clearly state:

(1) the maximum amount that is payable to the payee in the

policy on the death of an insured or insureds; and

(2) any terms under which an amount other than the maximum

amount of the policy is payable.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

SUBCHAPTER B. PROHIBITED POLICY PROVISIONS

Sec. 1101.051. APPLICABILITY OF SUBCHAPTER. Unless otherwise

provided by this subchapter, this subchapter applies to a life

insurance policy:

(1) issued or delivered in this state; or

(2) issued by a life insurance company organized in this state.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.052. EXCLUSION. Unless otherwise provided by this

subchapter, this subchapter does not apply to a policy issued

instead of or in exchange for a policy issued before July 10,

1909.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.053. CERTAIN LIMITATIONS PERIODS. A life insurance

policy may not include a provision that limits the time during

which an action under the policy may be commenced to a period of

less than two years after the date the cause of action accrues.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.054. RETROACTIVE ISSUANCE OR EFFECT; EXCHANGE OR

CONVERSION. (a) Except as provided by Subsection (b), a life

insurance policy may not contain a provision under which the

policy is issued or takes effect on a date more than six months

before the date of the original policy application if the

provision causes the insured to rate at an age that is younger

than the age of the insured on the date of the application. For

the purposes of this subsection, the age of the insured on the

date of the application is the age of the insured on the birthday

of the insured that is nearest to the date of the application.

(b) An issuer of a life or endowment insurance policy or annuity

contract may, with the consent of the policyholder or contract

holder, exchange the policy or contract for, or convert the

policy or contract into, a policy of another plan of insurance or

an endowment or annuity contract as of a date not earlier than

the effective date of the original policy or contract.

(c) If an exchange or conversion is made under Subsection (b)

and the newly written policy or contract is issued as of a date

earlier than the date of the application for exchange or

conversion, the amount of life or endowment insurance or annuity

provided under the newly written policy or contract may not

exceed the greater of:

(1) the amount that the premium paid for the original policy or

contract would have purchased on the plan of the newly written

policy or contract for an individual the age of the insured on

the effective date of the original policy or contract; or

(2) the amount of the original policy or contract.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.055. SETTLEMENT ON MATURITY LESS THAN FACE VALUE. (a)

Except as provided by Subsection (b), a life insurance policy

may not contain a provision for a settlement at maturity that is

less than the amount insured on the face of the policy plus the

amount of any dividend additions to the policy minus the sum of

the amount of any debt to the company that issues the policy and

the amount of any premium that may be deducted from the

settlement under the terms of the policy.

(b) A life insurance policy may provide for a settlement that

will be less than the amount required under Subsection (a) if the

death of the insured is:

(1) by the insured's own hand regardless of whether the insured

is sane or insane;

(2) caused by following a hazardous occupation that is stated in

the policy; or

(3) the result of aviation activities under conditions specified

in the policy and approved by the department under Chapter 1701.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2F.001, eff. April 1, 2009.

Sec. 1101.056. PRELIMINARY TERM INSURANCE OF MORE THAN ONE YEAR

IN LEVEL PREMIUM POLICY. (a) Sections 1101.051 and 1101.052 do

not apply to this section.

(b) This section does not apply to a life insurance policy

issued on or after the date determined under Section 1105.002(a)

or (b), as applicable.

(c) A level premium life insurance policy may not be issued or

sold in this state by any company if the policy provides for more

than one year of preliminary term insurance.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

SUBCHAPTER C. POLICY PROVISIONS REQUIRED BY OTHER JURISDICTIONS

Sec. 1101.101. REQUIRED POLICY PROVISIONS. (a) A policy issued

in this state by a life insurance company not organized under the

laws of this state may contain any provision that the law of the

state, territory, district, or county under which the company is

organized requires the policy to contain.

(b) Notwithstanding Chapter 1701, a policy issued or delivered

in another state, territory, district, or county by a life

insurance company organized under the laws of this state may

contain any provision required by the laws of that state,

territory, district, or county.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2F.002, eff. April 1, 2009.

SUBCHAPTER D. RIGHTS OF INSURED UNDER CERTAIN OLDER POLICIES

Sec. 1101.151. APPLICABILITY OF SUBCHAPTER. This subchapter

applies only to a life insurance policy issued before a date

described by Section 1101.010(a)(2). A term life insurance policy

is not required to comply with this subchapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.152. STIPULATED FORM OF INSURANCE. In case of a

default in the payment of a premium after premiums have been paid

for three years, a life insurance policy to which this subchapter

applies must contain a provision that secures a stipulated form

of insurance on the life of the insured.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.153. COMPUTATION OF NET VALUE OF STIPULATED FORM OF

INSURANCE. (a) Except as provided by Subsection (c), the net

value of a life insurance policy secured under Section 1101.152

must be equal to the amount of the reserve on the policy for

which premium payment is in default and on any dividend additions

to that policy on the date of default, less the sum of:

(1) not more than two and one-half percent of the amount insured

under the policy and any existing dividend additions to the

policy; and

(2) the amount of any existing indebtedness to the company on

the policy.

(b) The reserve described by Subsection (a) excludes any reserve

for disability or accidental death benefits.

(c) The net value of a life insurance policy that is secured

under Section 1101.152 for a policy other than an industrial life

insurance policy and that is issued to insure a female risk may

be computed using an age not more than three years younger than

the actual age of the insured if the policy uses the same age

differential to compute the policy reserve.

(d) Except as provided by Subsection (e), the amount of the

policy reserve under Subsection (a) must be computed according to

the mortality table, interest rate, and method adopted in the

policy for computing the reserve.

(e) In computing the value of paid-up term insurance with any

accompanying pure endowment, a rate of mortality may be assumed

that is not more than:

(1) 130 percent of the rate of mortality according to the

applicable table, or, for a substandard policy, the adopted

multiple of that mortality rate, if the American Men Ultimate

Table of Mortality or the Commissioners 1941 Standard Ordinary

Mortality Table is adopted for computing the reserve; or

(2) the rate of mortality shown by the Commissioners 1958

Extended Term Insurance Table, or, for a substandard policy, the

adopted multiple of that mortality rate, if the Commissioners

1958 Standard Ordinary Mortality Table is adopted for computing

the reserve.

(f) Subject to Subsection (g), a life insurance policy must

state:

(1) the amount and term of the insurance to be secured in

accordance with Section 1101.152 computed as if there were no

indebtedness on the policy and no dividend additions to the

policy; and

(2) the mortality table, interest rate, method, and, if the

policy is issued to insure the life of a woman, any age

differential, that will be used to compute the policy reserve.

(g) A mortality table, interest rate, method, or age

differential stated under Subsection (f) must be authorized by

law to compute the reserve liability on the policy.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.154. SURRENDER OF POLICY FOR SPECIFIED CASH SURRENDER

VALUE. (a) A life insurance policy to which this subchapter

applies must:

(1) provide within one month after a due date for a premium,

after premiums have been paid for three years, the policy may be

surrendered to the company that issues the policy at the

company's home office in return for an amount equal to the cash

value of the policy; and

(2) specify the cash value of the policy, which, subject to

Subsection (b), may not be less than the amount that would

otherwise be available to secure insurance in accordance with

Section 1101.152.

(b) The cash value of the policy may not exceed the amount of

the policy reserve.

(c) The policy may provide that the company that issues the

policy may defer payment of the cash value of the policy for a

period not to exceed six months after the date of application for

the payment.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.155. CASH VALUE TABLE. A life insurance policy to

which this subchapter applies must include a table that shows in

dollar amounts the cash value of the policy and the options

available to the policy owner if the owner defaults in premium

payments during each of the first 20 years that the policy will

be in force or each of the years during which premiums are

payable, beginning with the first year in which the cash values

and options are available.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1101.156. PURCHASE OF OTHER INSURANCE AND REINSTATEMENT. A

life insurance policy to which this subchapter applies must

provide that if there is a default in premium payments, the value

of the policy shall be applied to the purchase of other insurance

and the original life insurance policy may be reinstated within

three years after the date of default if:

(1) other insurance purchased with the value of the original

life insurance policy remains in force;

(2) the original life insurance policy has not been surrendered

to the company and canceled;

(3) the company receives evidence of insurability that is

satisfactory to the company; and

(4) the arrears of premiums are paid with interest.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.