State RegulationsTX specificDifficulty 3/5
Which statement best describes the purpose of the Texas Standard Nonforfeiture Law, TIC Chapter 1105?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
The Standard Nonforfeiture Law in TIC Chapter 1105 rests on the principle that the reserve accumulated under a life policy represents the policyowner's equity, so a lapse for nonpayment of premiums may not forfeit that value: it must be available as cash, or as reduced paid-up or extended term insurance. The chapter does not prevent a policy from lapsing and does not govern claim payment, which is addressed by TIC 1101.011 and the prompt-payment provisions of TIC Chapter 542.
Why the other options are wrong
- A) The deadline for settling a death claim is set by TIC 1101.011, not by the nonforfeiture law in TIC Chapter 1105.
- C) The Standard Nonforfeiture Law does not prohibit lapse; it requires that the accumulated value be preserved rather than forfeited.
- D) Dividends on participating policies are governed elsewhere in the Code; TIC Chapter 1105 deals with nonforfeiture values when premiums stop.
Memory hook
Nonforfeiture: the reserve is the owner's equity, so a lapse cannot confiscate it.