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78R5531 PB-D
By: Giddings H.B. No. 2811
A BILL TO BE ENTITLED
AN ACT
relating to certain small face amount life insurance policies.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 1101, Insurance Code, as effective June
1, 2003, is amended by adding Subchapter I to read as follows:
SUBCHAPTER I. DISCLOSURE REQUIREMENTS FOR SMALL FACE AMOUNT LIFE
INSURANCE POLICIES
Sec. 1101.401. DEFINITION. In this subchapter, "small face
amount policy" means a life insurance policy with an initial face
amount of $10,000 or less.
Sec. 1101.402. APPLICABILITY. (a) This subchapter applies
to each insurer authorized to write life insurance in this state,
including an insurer operating under Chapter 841, 881, 882, 884,
885, 886, 887, 888, or 982 and an insurer exempt under Section
887.102.
(b) This subchapter applies to any individual or group life
insurance policy, other than a term life insurance policy, issued
in this state, including an industrial insurance policy offered
under Chapter 1151.
Sec. 1101.403. MINIMUM DISCLOSURE REQUIREMENTS--APPLICANT
FOR INSURANCE COVERAGE. (a) At a minimum, an insurer subject to
this subchapter shall disclose to an applicant for a small face
amount policy:
(1) the death benefit under the policy;
(2) the annual premium for the policy;
(3) the cumulative premium for the policy paid at
intervals of 5, 10, and 20 years;
(4) the year in which cumulative premiums will exceed
the death benefit; and
(5) the possible advantages to the applicant of
coverage under a single policy with a larger face amount rather than
several smaller policies.
(b) For a guaranteed issue small face amount policy, the
insurer shall provide in the disclosure statement, in addition to
the information required under Subsection (a), a statement to the
applicant regarding the effect of good health on the cost of the
coverage provided under the policy and the possible advantages of
alternative insurance products.
Sec. 1101.404. APPLICANT'S RIGHT TO CANCEL. Each applicant
for coverage under a small face amount policy has the right to
cancel the policy and obtain a refund of any premium paid before the
31st day after the date of issuance of the policy. The insurer
shall provide each applicant for insurance coverage under a small
face amount policy written notice of the 30-day right to cancel.
Sec. 1101.405. TIMING OF DISCLOSURE TO APPLICANT. An
insurer that issues a small face amount policy shall provide the
disclosure and notice prescribed by Sections 1101.403 and 1101.404
on receipt of the application for coverage, and again not later than
the date on which the policy is delivered.
Sec. 1101.406. MINIMUM DISCLOSURE
REQUIREMENTS--POLICYHOLDER AND INSURED. At a minimum, an insurer
shall disclose to the holder of an insurance policy subject to this
subchapter and to each insured under the policy:
(1) the death benefit under the policy;
(2) the annual premium for the policy;
(3) the cumulative premium for the policy paid as of
the date of the disclosure;
(4) the cash value of the policy, if any; and
(5) the year in which cumulative premiums will exceed
the death benefit.
Sec. 1101.407. TIMING OF DISCLOSURE TO POLICYHOLDER AND
INSURED. (a) An insurer that issues a small face amount policy
shall provide the disclosure prescribed by Section 1101.406 at the
time that, on payment of the next premium under the policy, the
cumulative premiums paid will exceed the face amount of the policy.
(b) The insurer shall also provide the required disclosure
to each policyholder and insured on:
(1) the first anniversary of the date of the initial
delivery of the policy; and
(2) every subsequent five-year anniversary of the date
of the initial delivery of the policy.
Sec. 1101.408. EFFECT OF RIDERS. For purposes of this
subchapter, cumulative premiums include premiums paid for riders.
However, the face amount of a small face amount policy does not
include the benefit attributable to the riders.
Sec. 1101.409. RULES. The commissioner by rule shall
prescribe the format of the disclosure statements required under
Sections 1101.403 and 1101.406 and the notice required under
Section 1101.404. The commissioner may adopt other rules as
necessary to implement this subchapter.
SECTION 2. This Act takes effect September 1, 2003, and
applies only to an insurance policy that is delivered on or after
that date. A policy that is delivered before September 1, 2003, is
governed by the law as it existed immediately before the effective
date of this Act, and that law is continued in effect for that
purpose.