Policy provisions, options, and exclusions

II.B Policy provisions and options

Policy provisions, options, and exclusions share a 15-question section with riders on the Texas Life producer exam (InsTX-Life01) outline in force on or after 1 September 2026. These unofficial notes walk a long list: seventeen numbered provision topics, several with subpoints, plus the exclusion list. Provisions are the rules printed in the contract. Options are choices the owner may exercise. Exclusions are deaths the insurer does not cover, or covers only in a limited way.

II.B.1–7 Entire contract through premium payment

The entire-contract clause says the policy plus the attached application is the whole agreement. Oral promises and producer notes do not rewrite it. The insuring clause is the insurer’s core promise: pay the death benefit to the beneficiary when due proof of the insured’s death arrives, subject to the contract. Consideration is the applicant’s premium and statements; the insurer’s consideration is the promise to pay.

Free look gives the owner a short window after delivery to return the policy for a premium refund. Owner’s rights include naming and changing a revocable beneficiary, taking loans where allowed, assigning the policy, and choosing dividend and settlement options. The insured who is not the owner does not automatically have those rights.

Beneficiary designations are a cluster of their own. Primary beneficiaries take first. Contingent (secondary) beneficiaries take if no primary survives. A revocable beneficiary can be changed by the owner. An irrevocable beneficiary has a vested interest; the owner needs that person’s consent for changes that affect the interest. A common-disaster clause, often paired with the Uniform Simultaneous Death Act idea, treats the beneficiary as predeceasing the insured if both die in a common event or within a short stated window. Minor beneficiaries usually cannot give a valid receipt, so a trust or guardian is cleaner. A class designation (“children of the insured”) shares the proceeds among the class living at death.

Premium modes are annual, semiannual, quarterly, and monthly. More frequent modes cost more in total because of expense and lost interest. Grace period keeps the policy in force for a short time after a missed premium. Automatic premium loan, if elected and if cash value exists, pays a missed premium by creating a loan so the policy does not lapse. Premiums may be level (traditional) or flexible (universal life).

II.B.8–17 Reinstatement through accelerated benefits

Reinstatement lets a lapsed policy come back if the owner pays back premiums with interest, proves insurability if required, and acts within the reinstatement window. The original age and incontestability clock may be treated differently than on a brand-new policy. Texas can add its own reinstatement rules, so compare the contract with the Texas life-only outline item rather than assuming the general rule is the whole story.

Policy loans use cash value as collateral. Interest accrues. An unpaid loan plus interest reduces the death benefit. Withdrawals and partial surrenders permanently reduce cash value and usually the face amount. Nonforfeiture options apply when a permanent policy is surrendered or lapses with value: cash surrender, reduced paid-up insurance, and extended term. Dividends on participating policies may be taken in cash, applied to premium, left at interest, used as paid-up additions, or used to buy one-year term; nonparticipating policies do not pay policy dividends.

Incontestability generally bars the insurer from voiding the policy for misrepresentation after it has been in force for two years during the insured’s lifetime. Fraud may be treated differently depending on the jurisdiction and the clause. Suicide is typically excluded for a limited period, often two years; after that, suicide is covered. Misstatement of age or gender does not void the policy; the insurer adjusts the benefit to what the premium would have bought at the correct age or gender.

Assignments may be absolute (ownership transfers) or collateral (a lender’s interest). Settlement options let the beneficiary take a lump sum, interest only, fixed period, fixed amount, or a life income. Accelerated death benefits pay part of the face amount while the insured is living, usually for a qualifying terminal or chronic illness, and reduce what remains for the beneficiary.

II.C Policy exclusions

The outline lists war, aviation, and dangerous occupation. A war clause may exclude death from war or military action, especially on older or special-issue forms. Aviation exclusions often target non-commercial pilots or military aviation, not fare-paying passengers on scheduled airlines. A dangerous-occupation exclusion or extra premium may apply to high-risk work. Many modern standard policies cover these risks without a special exclusion, so read the clause rather than assuming every policy blocks them. If a death is excluded, premiums may be refunded rather than a face amount paid, depending on the form.