Texas required life insurance policy provisions

Texas writes the standard life policy provisions into TIC Chapter 1101 and 28 TAC Chapter 4. Most questions ask for the time period.

Questions and answers, explained

All 12 questions above, with the correct answer and why it is correct. Everything here is on texas required life insurance policy provisions.

1. A whole life policyowner with substantial cash value elected the automatic premium loan (APL) provision. She misses a premium and the grace period is about to expire. What happens?

   • AThe policy immediately lapses without any remaining value at all.
   • BAccumulated dividends must first be used to pay the overdue premium.
   • CThe policy automatically converts to extended term insurance for the remaining period.
   • DThe insurer advances the premium as a loan against cash value, keeping it in force.Correct

   Why: The APL provision authorizes the insurer to pay an overdue premium by creating a policy loan against the cash value, preventing unintentional lapse; the loan accrues interest and, if unpaid, reduces the death benefit. Option C describes a nonforfeiture option that applies only when the policy actually lapses without APL — the closest distractor. Dividends are a separate, elective option and are never guaranteed.

   Reference Texas outline #124401, general section II (Policy riders, provisions, options and exclusions)

2. Under TIC 1101.005, how long must the grace period be for paying a renewal premium on an individual life insurance policy in Texas?

   • AAt least 60 days
   • BAt least one monthCorrect
   • CAt least 90 days
   • DAt least 10 calendar days

   Why: TIC 1101.005 requires a grace period of at least one month for each premium after the first, during which the policy stays in force. The policy may charge interest on a premium paid in the grace period, or deduct the overdue premium from the death benefit if the insured dies during it.

   Reference TIC 1101.005 — Texas outline II.B.2

3. Ana's monthly life premium was due on March 1. She dies on March 20 without having paid it. What does the beneficiary receive?

   • ANothing, because the premium was unpaid on the due date
   • BHalf the death benefit, because the policy was in default
   • CThe death benefit, minus the overdue premiumCorrect
   • DOnly a refund of the premiums Ana paid

   Why: She died inside the one-month grace period, so the policy was still in force. TIC 1101.005 lets the policy deduct the overdue premium from any settlement, so the beneficiary gets the face amount less that premium.

   Reference TIC 1101.005 — Texas outline II.B.2

4. After how long in force during the insured's lifetime does a Texas individual life policy become incontestable, except for nonpayment of premium?

   • AOne year from its date of issue
   • BFive years from the application date
   • CThree years from its date of issue
   • DTwo years from its date of issueCorrect

   Why: TIC 1101.006 requires the policy to become incontestable after it has been in force two years from its date of issue during the insured's lifetime, except for nonpayment of premiums. The insurer may also reserve the right to contest at any time for violating conditions about military service in wartime.

   Reference TIC 1101.006 — Texas outline II.B.5

5. Under TIC 1101.003, what constitutes the entire contract of a Texas life insurance policy?

   • AThe policy, or the policy together with the applicationCorrect
   • BOnly the application signed by the applicant
   • CThe policy plus the agent's sales illustration and notes
   • DThe insurer's bylaws as amended from time to time

   Why: TIC 1101.003 requires the policy to state that the policy, or the policy and the application, make up the entire contract. Nothing outside it, such as the insurer's bylaws or the agent's notes, can be added later to change the terms.

   Reference TIC 1101.003 — Texas outline II.B.6

6. In the absence of fraud, how does a Texas life policy treat statements the insured made in the application?

   • AAs conditions precedent that must be proven before every claim
   • BAs warranties that void the policy if any detail is inaccurate
   • CAs representations, not warrantiesCorrect
   • DAs binding only on the agent who wrote them down

   Why: TIC 1101.007 says that, absent fraud, an insured's statements are representations, not warranties. A representation must be substantially true and material to justify rescission; a warranty would have to be literally true, which is far harsher on the insured.

   Reference TIC 1101.007 — Texas outline II.B.8

7. José stated his age as 40 on his application, but he was actually 43. He dies three years later. Under TIC 1101.008, what does the insurer pay?

   • AThe amount his premiums would have bought at his correct ageCorrect
   • BThe full face amount, because the policy is already incontestable
   • CNothing, because the misstatement voids the policy
   • DThe full face amount minus the premium difference

   Why: TIC 1101.008 and 28 TAC 4.606 require that if the insured's age was understated, the amount payable is what the premium paid would have purchased at the correct age. The incontestable clause does not bar this adjustment; it applies whenever the error is discovered.

   Reference TIC 1101.008; 28 TAC 4.606 — Texas outline II.B.9

8. Under TIC 1101.009, when must a Texas cash value life insurer make a policy loan available to the owner?

   • AOnly if the owner proves financial hardship to the insurer
   • BOnly after the policy has been in force for 10 years, and only if the insurer approves each loan
   • CFrom the first day, on every policy including term life
   • DAfter premiums are paid for three full years, with the policy assigned as loan securityCorrect

   Why: TIC 1101.009 requires a loan of up to the cash value plus dividend additions once the policy is in force, premiums have been paid for at least three full years, and the policy is properly assigned. The loan is secured only by the policy, and the policy is not voided until the debt equals or exceeds the cash value. Term policies are exempt because they have no cash value.

   Reference TIC 1101.009 — Texas outline II.B.3

9. Under TIC 1101.011, a Texas life insurer must settle a death claim no later than how long after receiving proof of death and of the claimant's right to the proceeds?

   • AOne year
   • BTwo monthsCorrect
   • CSix months
   • DTen days

   Why: TIC 1101.011 requires the policy to provide that settlement after the insured's death will be made not later than two months after receipt of proof of the death and of the claimant's right to the proceeds.

   Reference TIC 1101.011 — Texas outline II.B.10

10. An applicant wants his new Texas life policy dated back to save age, so that he rates at a younger age. What is the furthest back the policy may be dated?

    • AOne month before the date of the application
    • BOne year before the date of the application
    • CAny date the applicant chooses, if he pays the back premium
    • DSix months before the date of the applicationCorrect

    Why: TIC 1101.054 and 28 TAC 4.620 prohibit a policy from being issued or taking effect more than six months before the original application if that lets the insured rate at a younger age. Age is measured at the nearest birthday.

    Reference TIC 1101.054; 28 TAC 4.620 — Texas outline II.B.4

11. A Texas whole life policy lapsed for nonpayment and went onto extended term, but was never surrendered for cash. Within what period after the default may the owner reinstate it?

    • A31 days, with no evidence of insurability required at all
    • BSix months, with a new application that starts a new two-year incontestable period
    • CThree years, with evidence of insurability and payment of overdue premiums with interestCorrect
    • DTen years, by paying only the current premium, with no interest charged and no health questions

    Why: 28 TAC 4.611 requires policies with nonforfeiture benefits to allow reinstatement within three years of default, or longer at the insurer's option, if the policy has not been surrendered, on evidence of insurability satisfactory to the insurer and payment of the overdue premiums with interest.

    Reference 28 TAC 4.611 — Texas outline II.B.14

12. What is the shortest period a Texas life policy may allow for bringing a lawsuit after the cause of action accrues?

    • AOne year
    • BTwo yearsCorrect
    • C90 days
    • DSix months

    Why: 28 TAC 4.619 prohibits a life policy from limiting the time to bring an action at law or in equity to less than two years after the cause of action accrues.

    Reference 28 TAC 4.619 — Texas outline II.B.15

Drill the whole domain

• Life Policy Riders, Provisions, Options and Exclusions (11.5%)
• Texas Statutes and Rules — Life Insurance Only (4.6%)

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