CHAPTER 1151. INDUSTRIAL LIFE INSURANCE - Texas Statutes

INSURANCE CODE

TITLE 7. LIFE INSURANCE AND ANNUITIES

SUBTITLE C. SPECIALIZED COVERAGES

CHAPTER 1151. INDUSTRIAL LIFE INSURANCE

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 1151.001. DEFINITION. In this chapter, "industrial life

insurance" means life insurance under which the premiums are

payable:

(1) weekly; or

(2) less often than weekly but at least monthly, if the face

amount of insurance coverage provided by the policy is $1,000 or

less.

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

2003.

Sec. 1151.002. GENERAL APPLICABILITY OF CHAPTER. (a) Except as

provided by other law, this chapter controls the form and content

of an industrial life insurance policy delivered or issued for

delivery in this state by an insurance company.

(b) This chapter does not control an industrial life insurance

policy delivered or issued for delivery in this state by an

association described by Section 1151.004.

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

2003.

Sec. 1151.003. APPLICABILITY OF CHAPTER TO POLICY PROVIDING

ACCIDENT AND HEALTH BENEFITS. Except as otherwise provided by

this chapter, if an industrial life insurance policy provides

accident and health benefits in addition to natural death

benefits, this chapter applies only to the life insurance

benefits provided by that policy.

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

2003.

Sec. 1151.004. CERTAIN ASSOCIATIONS EXCEPTED. This chapter does

not apply to any of the following associations operating under

Chapter 886:

(1) a local mutual aid association;

(2) a statewide mutual life, health, and accident association;

or

(3) a burial association.

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

2003.

Sec. 1151.005. CERTAIN NONPROFIT ORGANIZATIONS EXCEPTED. This

chapter does not apply to:

(1) an order, society, association, or labor organization that:

(A) admits to membership only persons engaged in one or more

crafts or hazardous occupations in the same or similar lines of

business; and

(B) does not operate for profit;

(2) a ladies auxiliary to an order, society, association, or

labor organization described by Subdivision (1); or

(3) a fraternal order, association, or society.

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

2003.

SUBCHAPTER B. REQUIRED POLICY PROVISIONS

Sec. 1151.051. POLICY TITLE. An industrial life insurance

policy must contain a title on the face of the policy that:

(1) briefly describes the form of the policy; and

(2) includes the printed words "Industrial Policy."

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

2003.

Sec. 1151.052. ENTIRE CONTRACT. (a) An industrial life

insurance policy must provide that the policy is the entire

contract between the parties, except that at the option of the

insurer, the insurer may make the policy and the policy

application the entire contract between the parties.

(b) To make the policy application a part of the contract, a

copy of the application must be endorsed on or attached to the

policy at the time the policy is issued.

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

2003.

Sec. 1151.053. AGENT UNAUTHORIZED TO WAIVE OR CHANGE TERMS. An

industrial life insurance policy must provide that an agent may

not waive or change the terms of an application or policy.

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

2003.

Sec. 1151.054. STATEMENT MADE BY OR ON BEHALF OF INSURED. An

industrial life insurance policy must provide that, in the

absence of fraud, a statement made by the insured or on behalf of

the insured is considered a representation and not a warranty.

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

2003.

Sec. 1151.055. INCONTESTABILITY OF POLICY. An industrial life

insurance policy must provide that, after the policy has been in

force for two years from its date of issue during the lifetime of

the insured, the policy is incontestable except:

(1) for nonpayment of a premium;

(2) for violation of any policy condition relating to naval or

military service in time of war; and

(3) concerning a provision relating to:

(A) benefits in case of total or permanent disability as defined

by the policy; or

(B) additional insurance:

(i) specifically against accidental death; or

(ii) against loss of, or loss of use of, specific parts of the

body.

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

2003.

Sec. 1151.056. ADJUSTMENT OF AMOUNT PAYABLE IF AGE OF INSURED IS

MISSTATED. An industrial life insurance policy must provide

that, if the age of the insured is misstated, the amount payable

under the policy is the amount of insurance 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. 1151.057. GRACE PERIOD. (a) An industrial life insurance

policy must provide that the insured is entitled to a grace

period stated in the policy within which any premium after the

first premium may be paid. The grace period must be at least a

four-week period.

(b) During the grace period the policy continues in effect, but

if an event under which the insurer may be liable under the

policy occurs during the grace period and before the overdue

premiums are paid, the amount of the overdue premiums may be

deducted in a settlement made under the policy.

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

2003.

Sec. 1151.058. NONFORFEITURE BENEFITS AND CASH SURRENDER VALUES

IN GENERAL. An industrial life insurance policy must provide, in

case of default in payment of premiums, nonforfeiture benefits

and cash surrender values in accordance with:

(1) Sections 1151.152-1151.154; 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. 1151.059. SURPLUS. An industrial life insurance policy

that is a participating policy must provide that the insurer

shall annually determine and apportion any divisible surplus

accruing on the policy.

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

2003.

Sec. 1151.060. CLAIM BASED ON DEATH OF INSURED. An industrial

life insurance policy must provide that if a claim arises as the

result of the death of the insured, the insurer shall settle the

claim not later than two months after the date the insurer

receives at the insurer's home office:

(1) proof of death satisfactory to the insurer; and

(2) proof of the right of the claimant to the insurance

proceeds.

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

2003.

Sec. 1151.061. REINSTATEMENT OF POLICY. (a) An industrial life

insurance policy must provide that unless the cash surrender

value has been paid or the term of extended insurance has

expired, the policy may be reinstated not later than the first

anniversary of or, at the option of the insurer, not later than

the 52nd week after the date of default in payment of premiums if

the insured:

(1) pays all overdue premiums;

(2) pays or reinstates any other debt owed to the insurer on the

policy; and

(3) presents evidence of insurability satisfactory to the

insurer.

(b) The insurer may impose on the overdue premiums interest at

an annual rate specified in the policy, not to exceed six

percent.

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

2003.

Sec. 1151.062. EXCEPTION FOR POLICIES ISSUED OR GRANTED UNDER

CERTAIN NONFORFEITURE PROVISIONS. This subchapter does not apply

to a policy issued or granted under a nonforfeiture provision

prescribed by Section 1151.058.

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

2003.

SUBCHAPTER C. AUTHORIZED OR PROHIBITED POLICY PROVISIONS

Sec. 1151.101. AUTHORIZED PROVISIONS. In addition to the

provisions required by Subchapter B and Section 1151.152, an

industrial life insurance policy may:

(1) exclude liability or promise a benefit that is less than the

full amount payable as a death benefit if the insured:

(A) dies by the insured's own hand, regardless of whether the

insured is sane or insane; or

(B) dies as a result of engaging in a stated hazardous

occupation;

(2) promise a benefit that is less than the full amount payable

if the insured dies as a result of an aviation activity under a

condition specified in the policy approved by the department as

provided by Chapter 1701;

(3) limit the maximum amount payable on the death of a child

younger than 15 years of age; and

(4) include any other provision not otherwise prohibited by this

chapter.

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.008, eff. April 1, 2009.

Sec. 1151.102. PROHIBITED PROVISIONS. (a) An industrial life

insurance policy may not:

(1) require a cause of action based on the policy to be

initiated before the second anniversary of the date the cause of

action accrues; or

(2) except as otherwise provided by this subchapter, establish a

method of settlement at maturity that provides less value than

the face amount of insurance coverage provided by the policy and

any dividend additions to the policy, less:

(A) any debt owed to the insurer on the policy; and

(B) any premium that may be deducted under the terms of the

policy.

(b) Subsection (a)(2) does not prevent a limitation from being

imposed on payment of an additional accidental death benefit in

case of accidental death resulting from certain specified causes.

(c) A nonparticipating or term policy may not incorporate any

part of a provision described by Subchapter B or Section 1151.152

that does not apply to that type of policy.

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

2003.

SUBCHAPTER D. RIGHTS OF INSURED UNDER CERTAIN OLDER POLICIES

Sec. 1151.151. EXTENDED TERM OR PAID-UP INSURANCE FOR CERTAIN

POLICIES. (a) This section applies only to a policy delivered

or issued for delivery in this state before March 29, 1941, under

former Article 3.43 of this code.

(b) An insured or a beneficiary of the insured is entitled to

elect extended term or paid-up insurance under an industrial life

insurance policy that does not by its terms provide a stipulated

form of insurance to the insured or beneficiary on default in

payment of premiums if:

(1) premiums have been paid on the policy for at least three

years; and

(2) the insured or beneficiary gives written notice of the

election to the insurer at the insurer's home office before the

expiration of the term of extended insurance.

(c) An insured or beneficiary who does not make an election as

provided by Subsection (b) is considered to have elected extended

term insurance.

(d) The net value of extended term or paid-up insurance shall be

determined as provided by Section 1151.153.

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

2003.

Sec. 1151.152. PROVISIONS CONCERNING STIPULATED FORM OF

INSURANCE OR SPECIFIED CASH SURRENDER VALUE IN CERTAIN POLICIES.

(a) An industrial life insurance policy issued before the date

described by Section 1151.058(2) must contain a provision

substantially as follows:

(1) in case of default in payment of premiums:

(A) after premiums have been paid for three years, a stipulated

form of insurance is available, effective from the due date of

the defaulted premium; and

(B) after premiums have been paid for five years, the stipulated

form of insurance described by Paragraph (A) or a specified cash

surrender value is available, at the election of the insured; and

(2) the stipulated form of insurance takes effect unless the

insured applies in writing for the specified cash surrender value

within the grace period following the due date of the defaulted

premium.

(b) The policy must:

(1) state the amount and term of the stipulated form of

insurance, computed assuming that there is no debt owed on or

dividend additions to the policy;

(2) specify the mortality table, the rate of interest, and the

method of valuation, if a method of valuation other than net

level premium is used, adopted for computing the reserve on the

policy; and

(3) provide a table showing in numbers the nonforfeiture options

available under the policy at the end of each year in case of

default in payment of premiums.

(c) Subsections (a), (b)(1), and (b)(3) do not apply to a term

insurance policy with a term of 20 years or less.

(d) The table described by Subsection (b)(3) must begin with the

year in which the numbers on the nonforfeiture options become

available and must cover not more than the first 20 years of the

policy. On the expiration of the period for which the numbers are

shown by the policy, the insurer shall provide an extension of

the table on request.

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

2003.

Sec. 1151.153. COMPUTATION OF NET VALUE OF STIPULATED FORM OF

INSURANCE OR SPECIFIED CASH SURRENDER VALUE. (a) The net value

of the stipulated form of insurance or the specified cash

surrender value available under Section 1151.152 may not be less

than the reserve on the policy at the end of the last completed

quarter of the policy year for which premiums have been paid,

less:

(1) an amount of not more than:

(A) 2-1/2 percent of the maximum amount insured under the policy

and any dividend additions to the policy, if the age of the

insured on the date the policy was issued is younger than 10

years; or

(B) 2-1/2 percent of the amount insured under the policy at the

time the computation is made and any dividend additions to the

policy, if the age of the insured on the date the policy was

issued is 10 years or older; and

(2) any existing debt to the insurer on or secured under the

policy.

(b) The reserve described by Subsection (a):

(1) includes:

(A) the reserve for any paid-up additions to the policy; and

(B) the amount of any dividends credited to the policy; and

(2) excludes any reserve on:

(A) total or permanent disability, as defined by the policy; and

(B) additional accidental death benefits.

(c) 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, if the 1941 Standard Industrial Mortality Table

or the 1941 Sub-standard Industrial Mortality Table is adopted

for computing the reserve; or

(2) the rate of mortality shown by:

(A) the Commissioners 1961 Industrial Extended Term Insurance

Table, if the Commissioners 1961 Standard Industrial Mortality

Table is adopted for computing the reserve; or

(B) any other mortality table specified by the insurer and

approved by the department, if the policy is substandard.

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

2003.

Sec. 1151.154. SURRENDER OF POLICY FOR SPECIFIED CASH SURRENDER

VALUE. (a) An industrial life insurance policy issued before

the date described by Section 1151.058(2) under which the insured

applies for cash surrender value must be surrendered for the

specified cash surrender value to the insurer at the insurer's

home office within the grace period following the due date of the

defaulted premium.

(b) The insurer may defer payment for a period of not more than

six months after the date of application for the specified cash

surrender value.

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

2003.