Texas Group Life, Credit Life and Replacement
12.5% of the exam 3 min
Three of the life-only Texas subjects on the Life Agent exam, each written into its own chapter of the Texas Insurance Code: group life (Chapter 1131), credit life (Chapter 1153) and replacement (Chapter 1114).
Group life: the required provisions
A Texas group life policy must give a grace period of 31 days for every premium except the first (TIC 1131.103). It becomes incontestable, except for nonpayment of premium, after two years in force, and an insured's statement about insurability cannot be used against the coverage once it has been in force two years during the insured's lifetime (TIC 1131.104). Statements by the policyholder or an insured are representations, not warranties, and an insured's statement can be used in a contest only if a copy was given to that person or the beneficiary (TIC 1131.105). Subject to the policy, an insured may assign the group life benefits, absolutely or as collateral, to anyone except the insured's employer (TIC 1131.006).
Group life: converting to an individual policy
When employment or membership ends, the insured can convert to an individual life policy without evidence of insurability by applying and paying the first premium within 31 days (TIC 1131.110). When the group policy itself ends or drops a class, only members insured under it for at least five years have that right (TIC 1131.111). A covered spouse whose coverage ends because the employee's job ends, the employee dies or the group contract ends has the same conversion rights for the spouse's coverage as the employee (TIC 1131.354).
Credit life
Credit life insures a debtor's life for a loan. Chapter 1153 covers credit life charged to the debtor on credit transactions of 10 years or less (TIC 1153.004). It may be issued only as an individual term policy to the debtor or a group term policy to the creditor (TIC 1153.151), evidenced by an individual policy or a group certificate (TIC 1153.153). The initial amount may not exceed the total debt, and on installment debt it may never exceed the greater of the scheduled or actual unpaid balance (TIC 1153.155). Coverage generally begins on the day the debtor becomes obligated (TIC 1153.157), and the creditor may not charge the debtor more than the premium the insurer charges the creditor (TIC 1153.201).
Replacement
With every life or annuity application, the agent submits a statement signed by the applicant and the agent saying whether the applicant has existing policies or contracts (TIC 1114.051). If not, the agent's replacement duties end there. If so, the agent must present and read a replacement notice no later than when the application is taken, both sign it, and it stays with the applicant; the agent also leaves the original or a copy of all sales material used. The replacing insurer must notify any existing insurer affected within five business days of receiving the application that shows replacement (TIC 1114.053). The existing insurer keeps the notifications at least five years and sends the owner a letter about the right to information on the existing policy's values (TIC 1114.054).
Where people lose points
✗ "Group life gives a one-month grace period, like individual life."
✓ Group life: 31 days (1131.103). Individual life: at least one month (1101.005).
✗ "Every member can convert when the whole group policy ends."
✓ Only members insured at least five years. Leaving the job gives every insured the right.
✗ "Credit life can be whole life to build value for the debtor."
✓ It may be issued only on a term plan, individual or group.
✗ "The agent only has to read the replacement notice if the applicant asks."
✓ The agent reads it aloud unless the applicant declines, and both sign that it was read or declined.
Numbers to memorize
| Group grace period | 31 days (TIC 1131.103) |
| Group incontestability | 2 years (TIC 1131.104) |
| Conversion after leaving the job | Apply and pay within 31 days (TIC 1131.110) |
| Conversion when the policy ends | Insured at least 5 years (TIC 1131.111) |
| Group assignment | Anyone but the employer (TIC 1131.006) |
| Credit life scope | Credit of 10 years or less (TIC 1153.004) |
| Credit life amount | Not more than the debt (TIC 1153.155) |
| Replacement notice to existing insurer | Within 5 business days (TIC 1114.053) |
Test yourself
No answers here on purpose — retrieving them is the practice. Drill this domain if any of these stall you.
- How is an insured's statement in a group life application treated, and when can it be used in a contest?
- Which conversion right does a covered spouse have when the employee dies?
- What are the only two forms in which credit life may be issued?
- What may a creditor charge a debtor for credit life?
- What must the agent leave with an applicant in a replacement sale?