CHAPTER 1106. REINSTATEMENT OF CERTAIN LIFE INSURANCE POLICIES - Texas Statutes

INSURANCE CODE

TITLE 7. LIFE INSURANCE AND ANNUITIES

SUBTITLE A. LIFE INSURANCE IN GENERAL

CHAPTER 1106. REINSTATEMENT OF CERTAIN LIFE INSURANCE POLICIES

Sec. 1106.001. APPLICABILITY OF CHAPTER. (a) This chapter

applies to each individual life insurance policy issued to a

resident of this state by an insurer authorized to engage in the

business of insurance in this state, including a stipulated

premium company and a fraternal benefit society, that is subject

to lapse on or after September 1, 1995.

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

provides nonforfeiture benefits in accordance with the

requirements of this code.

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

2003.

Sec. 1106.002. REINSTATEMENT REQUIRED; EXCEPTION. (a) On the

lapse of an individual life insurance policy following the

unintentional default in the payment of premiums caused by the

mental incapacity of the insured, a person is entitled to have

the policy reinstated under this chapter if:

(1) the policy had been in effect continuously for at least five

years immediately preceding the lapse; and

(2) there was not a default in the payment of premiums on the

policy during the period described by Subdivision (1).

(b) The insurer is not required to reinstate a policy or pay

benefits under this chapter if the insured first became mentally

incapacitated after the expiration of an applicable grace period

contained in the policy.

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

2003.

Sec. 1106.003. MENTAL INCAPACITY DEFINED. In this chapter,

"mental incapacity" means a lack of the ability to:

(1) understand and appreciate the nature and consequences of a

decision regarding the failure to pay a premium when due; and

(2) reach an informed decision in the matter.

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

2003.

Sec. 1106.004. DIAGNOSIS OF MENTAL INCAPACITY REQUIRED. For

purposes of this chapter, mental incapacity must be:

(1) established by the clinical diagnosis of a physician

licensed in this state who is qualified to make the diagnosis;

and

(2) based on reasonable medical judgment.

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

2003.

Sec. 1106.005. REQUEST FOR REINSTATEMENT; LIMITATION. (a) A

request for reinstatement of a policy under this chapter and

proof of mental incapacity may be filed with the insurer by:

(1) the insured;

(2) the insured's legal guardian or other legal representative;

or

(3) the legal representative of the insured's estate.

(b) The request and the proof of mental incapacity must be filed

not later than the first anniversary of the date the policy

lapses.

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

2003.

Sec. 1106.006. REINSTATEMENT. (a) After the requirements of

Section 1106.005 have been satisfied, the insurer shall reinstate

the policy.

(b) The policy must be reinstated within one year from the date

of lapse on payment of:

(1) the premiums owed from the date of initial lapse to the date

of reinstatement; and

(2) interest on the premiums at a rate not to exceed six percent

a year for the period.

(c) The insurer may not require evidence of insurability as a

condition of reinstatement.

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

2003.

Sec. 1106.007. EFFECT OF REINSTATEMENT. On reinstatement of the

policy, the original contractual provisions apply as if the

coverage had been continuous.

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

2003.

Sec. 1106.008. REDUCTION IN BENEFITS. If there is an

uncontroverted claim for benefits in an amount that exceeds the

amount of premiums and interest owed and unpaid under a policy

that is eligible for reinstatement under this chapter, the

insurer shall pay the amount of benefits owed reduced by the

amount of premiums and interest owed and unpaid on the date the

benefits are paid.

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

2003.

Sec. 1106.009. DISCLOSURE. (a) Each insurer shall disclose

fully to each policyholder or insured the requirements of this

chapter.

(b) As to a policy to which this chapter applies that was issued

on or after September 1, 1995, an insurer may make the disclosure

required by Subsection (a):

(1) not later than the 90th day after the date the policy

lapses; or

(2) by including the disclosure information in the policy or in

an endorsement attached to the policy.

(c) As to a policy to which this chapter applies that was issued

before September 1, 1995, and for which the insurer did not make

the required disclosure on or before November 30, 1995, the

insurer shall make the disclosure required by Subsection (a) not

later than the 90th day after the date the policy lapses.

(d) Notice is considered to comply with Subsection (b) or (c) if

the notice is mailed by first class mail to the last known

address of the policyholder.

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

2003.

Sec. 1106.010. RULES. The commissioner shall adopt reasonable

rules to implement this chapter, and the disclosure required by

Section 1106.009 must be made in the form and manner prescribed

by the commissioner after notice and hearing.

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

2003.