State RegulationsTX specificDifficulty 2/5
A Texas life insurance policy form provides that if the policy matures as an endowment, the insurer will pay an amount less than the policy's face amount. Under the Texas statute governing settlement at maturity, how is this provision treated?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under TIC 1101.055, a Texas life insurance policy may not contain a provision for settlement at maturity of an amount less than the face amount, and the prohibition cannot be waived by the applicant's consent or cured by disclosure. The practical consequence is that a form containing such a provision will not pass TDI review, and delivering policies on a form that violates the prohibited-provision rules exposes the insurer to a compliance finding.
Why the other options are wrong
- A) Disclosure in the policy summary does not validate a provision the Insurance Code prohibits.
- C) Initials or consent cannot waive a provision the statute prohibits.
- D) The prohibition is not limited by policy type; it applies to life policies generally.
Memory hook
At maturity you get the face amount — the Code allows no haircut.