Texas individual life policy provisions

II.B Individual life and annuity policy provisions

Texas individual life and annuity policy provisions are tested on the life-only half of the Texas Life producer exam (InsTX-Life01) outline in force on or after 1 September 2026. These unofficial notes stay with Texas-required clauses. The life-only statute block carries 10 scored questions. This lettered topic is the longest list in that block: sixteen numbered items. Pair it with the general-knowledge provisions page. That page explains the usual contract language. This page is about what Texas expects the form to say.

They are not the Insurance Code, not TDI guidance, and not exam items. Not a prelicensing course. Not affiliated with Pearson VUE, TDI, or NAIC. Passing is not guaranteed. A useful first cut is required versus prohibited. Required provisions must appear, or the form is treated as if they do. Prohibited language cannot make the owner worse off than the statute.

II.B.1–4 Free look, grace, loans, prohibited provisions

Free look is a short right, after delivery, to return the contract for an unconditional refund. The clock starts when the owner receives the policy or annuity, not when the home office prints it. Teaching figures are often 10 days on ordinary life and longer when a required annuity buyer’s guide was missing at application—commonly at least 15 calendar days. Variable or modified-guaranteed annuity refunds usually put the account back as if charges had not been taken. Notice of the window belongs on or with the cover page, not buried in a later mailing.

Grace period keeps the policy in force for at least one month after the first premium if a later premium is late. Coverage does not vanish the day after the due date. If the insured dies during grace, the overdue premium is typically deducted from the settlement. The contract may charge interest on a premium paid late. Grace is not free look: one is extra time to pay, the other is a right to walk away after delivery.

Policy loans become available once cash value exists. The loan is a debt against the contract, not a withdrawal. Unpaid principal and interest reduce the death benefit. Texas expects the form to offer this right on permanent designs that have value; a clause that quietly forbids any loan after value has built is the fact pattern to flag.

Prohibited provisions are clauses that undercut the statute: stretching contestability, treating application statements as warranties, backdating in a way that evades rating or free-look rules, or making the owner’s rights thinner than the required list. If a form tries to take away grace, entire contract, or an age adjustment, treat that language as the prohibited item, not as a clever extra feature.

II.B.5–10 Incontestability, contract text, age, claim time

Incontestability is the Texas two-year clock. After the policy has been in force for two years from its issue date during the insured’s lifetime, the insurer generally cannot void it for application misstatements, except for nonpayment of premiums. A clause that restarts or lengthens that clock—language such as “while continuously in force”—is the prohibited stretch. On a joint or multi-life form, incontestability runs as to each insured. Reinstatement can start a new two-year window, but only for a material and fraudulent misrepresentation that caused the reinstatement.

Entire contract means the policy plus the attached application is the whole agreement. Oral promises and producer notes do not rewrite it. Premiums are payable in advance. Statements of the insured on the application are representations, not warranties: they need to be substantially true. A warranty treatment that lets the insurer void the contract for any inaccuracy is the prohibited version.

Misstatement of age does not void the policy. If age was understated, the amount payable is what the premium would have bought at the correct age. The same idea applies if more than one life is rated on the form and the actuarial construction requires an adjustment. Do not confuse this with a health misrepresentation during the contestable period. Age error adjusts the check. Material health fraud in the first two years can contest the contract.

Time for settlement of a claim is a Texas timing rule, not a beneficiary-option menu. After the insurer has due proof of death and proof that the claimant is entitled to the proceeds, settlement is due not later than two months later. Late claim handling can also trip the unfair-claims list on the marketing-practices page. Those are different outline items: one is the contract clock, the other is the conduct rule.

II.B.11–16 Beneficiaries, assignment, acceleration, reinstatement

An insured of legal age may designate a beneficiary in writing, and may transfer or assign the policy or an interest in it to the extent the form allows. Any individual, partnership, association, corporation, or other legal entity can be named. A telephone change or an unsigned sticky note is not the Texas method. Minors generally cannot complete that writing on their own.

Assignment of benefits is allowed: the insured, owner, or annuitant may assign proceeds or other contract rights as the form permits. That is different from a scheme that assigns dividends or other guaranteed returns to a third party as an “investment” for the owner—Texas treats that packaging as prohibited. An assignment also does not wipe out a child-support lien that already attached.

Accelerated term-life benefits pay part of the face while the insured is living, after a written medical opinion the insurer accepts. Teaching triggers include a terminal illness reasonably expected to cause death within two years, a long-term-care illness, or listed conditions such as certain cancers, organ-transplant needs, or severe coronary disease. The accelerated amount comes out of the remaining death benefit and out of any amount the insured could later convert. It is not extra coverage stacked on top of the face.

Reinstatement, if the policy lapsed with value and was not surrendered and cancelled, is typically available for three years (or longer if the company allows). The owner pays back premiums with interest and gives evidence of insurability that need not be limited to “good health” only. Limitations of lawsuits stop a form from cutting the time to sue below what Texas allows. Settlement at maturity is the endowment or maturity payout when the insured is still living—another place the age-adjustment and loan-offset math can appear. Study this list as Texas required language, then return to the general provisions page for the everyday definitions.