State RegulationsTX specificDifficulty 2/5
Under the Texas nonforfeiture requirements, including 28 TAC 3.3844, what must an individual deferred annuity contract provide to the contract owner?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under the Texas nonforfeiture requirements, including 28 TAC 3.3844 for individual deferred annuity contracts, the contract must provide a minimum nonforfeiture benefit for an owner who stops making premium payments before annuity payments begin. The rule parallels the life insurance Standard Nonforfeiture Law in TIC Chapter 1105: value accumulated under the contract cannot simply be forfeited. The contract does not promise a full annuity income stream on a single premium, nor a death benefit equal to a face amount.
Why the other options are wrong
- B) An annuity contract is not a face-amount death benefit contract, so this is not what the nonforfeiture rule requires.
- C) Paying only the initial premium does not entitle the owner to a guaranteed income stream; what the contract must provide is the required minimum nonforfeiture benefit.
- D) The nonforfeiture benefit is the required minimum determined under the rule, not necessarily a return of total premiums paid.
Memory hook
Stop paying into a deferred annuity and you still get the required minimum value.