Life and Health Insurance · Texas statutes and rules pertinent to life insurance only · 10 min read
Texas life insurance marketing and individual policy provisions
- Identify Texas rules governing life insurance advertisements, disclosures, endorsements, and policy comparisons.
- Explain required and prohibited individual life insurance policy provisions under the Texas Insurance Code and Texas Administrative Code.
- Apply statutory standards for policy loans, grace periods, reinstatement, backdating, and annuity right to examine timeframes.
General Rules for Texas Life Insurance Advertisements
Texas law strictly governs how you present life insurance products to prospective clients. An advertisement must identify the person or entity responsible for the advertisement (28 TAC §21.104(a)). The insurer full licensed name must appear in each of its invitation to inquire and invitation to contract advertisements, including any portion returned to the insurer or agent, unless that portion is detachable from another form containing the full licensed name (28 TAC §21.104(a)(1)). Additionally, the full licensed name of the insurer must appear at or before the first appearance of any shortened or substitute name in the body of the text (28 TAC §21.104(a)(1)). An agent full licensed name, registered assumed name, or Texas agent license number is sufficient when an advertisement addresses coverages generally and does not describe a specific policy or coverages of a particular insurer (28 TAC §21.104(a)(2)).
Advertisements cannot hide the true identity of the insurance company. An advertisement other than institutional may not use a trade name, group designation, parent company name, division name, service mark, or slogan without disclosing the actual insurer if it would tend to mislead a prospective purchaser (28 TAC §21.104(b)). An advertisement may not use words, symbols, or physical materials that could mislead prospective insureds into believing the advertisement or solicitation is connected with a municipal, state, or federal government agency (28 TAC §21.104(c)). All non-institutional advertisements must explicitly and conspicuously disclose that the product is insurance, an annuity, HMO coverage, a life settlement contract, or a prepaid legal services contract (28 TAC §21.104(d)). Furthermore, an advertisement intended to be seen or heard beyond the jurisdiction in which the insurer is licensed may not imply licensing beyond those limits (28 TAC §21.104(e)).
Clarity is required when offering multiple coverages or multiple companies. An advertisement that contains an application and advertises more than one policy must clearly reflect that costs and benefits apply to separate policies (28 TAC §21.104(g)). When multiple insurers are represented in one invitation to inquire or contract, the advertisement must identify each issuer and disclose that each insurer has sole financial responsibility for its own products (28 TAC §21.104(i)). For example, if Carlos produces a mailer presenting life options underwritten by two distinct companies, his mailer must identify both carriers and state that each has sole financial responsibility for its respective contracts.
Common mistakes
- Believing life policies can be backdated up to one year; Texas law caps backdating at six months to rate the applicant at a younger age (Tex. Ins. Code §1101.054(a)).
- Assuming the Texas grace period is always stated as 30 days; the statute requires a grace period of at least one month (Tex. Ins. Code §1101.005(a)(1)).
- Thinking an insurer can deduct general debts from death claim proceeds; Texas permits deducting only indebtedness on account of and secured by the policy (28 TAC §4.621(g)).
- Confusing the variable annuity rescission right with the fixed annuity right; variable annuities refund cash surrender value plus deducted fees and charges, and accredited investors are exempt from this 20-day rescission period (Tex. Ins. Code §1116.002(b)-(c)).
Key points
- Advertisements must identify the responsible person or entity; in an insurer’s invitations to inquire or contract, its full licensed name must appear at or before the first shortened or substitute name in the body of the text, subject to the rule’s other identification provisions (28 TAC §21.104(a)).
- Compensation for a testimonial, endorsement, or appraisal must be disclosed using language substantially as 'Paid Endorsement'; a testimonial, recommendation, or endorsement by someone other than the issuing insurer or its agent must not promise future policy outcomes (28 TAC §21.107(g), (h)).
- For at least 20 days after delivery, a fixed annuity purchaser may rescind for an unconditional refund of premiums paid, including contract fees or charges; a variable or modified guaranteed annuity purchaser generally receives cash surrender value plus fees or charges deducted from premiums or imposed under the contract, subject to the accredited-investor exception (Tex. Ins. Code §1116.002).
- If the required buyer’s guide and disclosure document are not provided at or before application, a right-to-examine period of at least 15 calendar days begins when the consumer receives the annuity contract and runs concurrently with other required right-to-examine periods; the rule’s refund and right-to-examine requirements do not apply to an accredited investor (28 TAC §4.2311(a), (c), (e)).
- In the absence of fraud, an insured’s statements are representations rather than warranties; a life policy in force for two years from its issue date during the insured’s lifetime is incontestable except for nonpayment of premiums, subject to the permitted wartime naval- or military-service provision; and the required grace period is at least one month (Tex. Ins. Code §§1101.005.007).
- A policy subject to the loan requirement must provide for a loan if it is in force, premiums have been paid for at least three full years, and it is properly assigned; the policy may provide for deferral of the loan for up to six months after application (Tex. Ins. Code §1101.009).
- A life policy may not provide for backdating more than six months before the original application if doing so gives the insured a younger rating age, and it may not contain a provision limiting the time to bring an action to less than two years after the cause of action accrues (Tex. Ins. Code §1101.054(a); 28 TAC §4.619).
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