2023 Texas Statutes › Insurance Code › Title 7 - Life Insurance and Annuities › Subtitle A - Life Insurance in General › Chapter 1105 - Standard Nonforfeiture Law for Life Insurance › Subchapter A. General Provisions › Section 1105.004. Required Nonforfeiture Provisions

Sec. 1105.004.  REQUIRED NONFORFEITURE PROVISIONS.  (a)  A life insurance policy delivered or issued for delivery in this state must contain in substance the provisions prescribed by Subsections (b), (c), and (d) or corresponding provisions that:
(1)  in the opinion of the department, are at least as favorable to the defaulting or surrendering policyholder;  and
(2)  essentially comply with Section 1105.012.
(b)  A life insurance policy must provide that if there is a default in the payment of a premium the company, on proper request not later than the 60th day after the due date of the premium that is in default, will grant a paid-up nonforfeiture benefit on a plan stipulated in the policy, effective as of that due date, in the amount specified by this chapter.  A company may substitute for the paid-up nonforfeiture benefit required by this subsection an actuarially equivalent alternative paid-up nonforfeiture benefit that provides a greater amount or longer period of death benefits or, if applicable, a greater amount or earlier payment of endowment benefits.  To elect an alternative paid-up nonforfeiture benefit under this subsection, the person entitled to make the election must submit a proper request not later than the 60th day after the due date of the premium that is in default.
(c)  A life insurance policy must:
(1)  provide that on surrender of the policy not later than the 60th day after the due date of a premium payment that is in default the company will pay, in lieu of a paid-up nonforfeiture benefit, a cash surrender value in the amount specified by this chapter if the premiums have been paid for at least:
(A)  three full years for a policy of ordinary insurance;  or
(B)  five full years for a policy of industrial insurance;
(2)  provide that a specified paid-up nonforfeiture benefit is effective as specified by the policy unless the person entitled to make the election elects another available option not later than the 60th day after the due date of a premium payment that is in default;  and
(3)  provide that on surrender of the policy not later than the 30th day after any policy anniversary the company will pay a cash surrender value in the amount specified by this chapter if:
(A)  the policy has become paid up by completion of all premium payments;  or
(B)  the policy is continued under a paid-up nonforfeiture benefit that became effective on or after:
(i)  the third policy anniversary for a policy of ordinary insurance;  or
(ii)  the fifth policy anniversary for a policy of industrial insurance.
(d)  A life insurance policy must contain:
(1)  subject to Subsection (e), a statement of:
(A)  the mortality table, interest rate, and method used to compute the cash surrender values and the paid-up nonforfeiture benefits available under the policy, if the policy:
(i)  causes, on a basis guaranteed by the policy, unscheduled changes in benefits or premiums;  or
(ii)  provides an option for changes in benefits or premiums other than a change to a new policy;  or
(B)  the mortality table and interest rate used to compute the cash surrender values and the paid-up nonforfeiture benefits available under the policy, with a table showing the cash surrender value, if any, and paid-up nonforfeiture benefit, if any, available under the policy on each policy anniversary during the first 20 policy years or the term of the policy, whichever is shorter, if the policy is a policy other than one described by Paragraph (A)(i) or (ii);
(2)  a statement that the cash surrender values and the paid-up nonforfeiture benefits available under the policy are not less than the minimum values and benefits required by the insurance laws of this state;
(3)  an explanation of the manner in which the cash surrender values and the paid-up nonforfeiture benefits are altered by the existence of any paid-up additions credited to the policy or any indebtedness to the company on the policy and, if a detailed statement of the method used to compute the values and benefits shown in the policy is not stated in the policy, a statement that the method of computation has been filed with the department;  and
(4)  a statement of the method to be used to compute the cash surrender value and paid-up nonforfeiture benefit available under the policy on any policy anniversary after the last anniversary for which those values and benefits are consecutively shown in the policy.
(e)  The values and benefits described by Subsection (d)(1)(B) must be computed on the assumption that:
(1)  there are no dividends or paid-up additions credited to the policy;  and
(2)  there is no indebtedness to the company on the policy.
(f)  A provision prescribed by Subsection (b), (c), or (d) or a portion of a provision that does not apply because of the plan of insurance may, to the extent inapplicable, be omitted from the policy.
(g)  A company shall reserve the right to defer payment of any cash surrender value for a period of six months after demand for payment of the cash surrender value and surrender of the policy.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.