CHAPTER 1106. REINSTATEMENT OF CERTAIN LIFE INSURANCE POLICIES
INSURANCE CODE
TITLE 7. LIFE INSURANCE AND ANNUITIES
SUBTITLE A. LIFE INSURANCE IN GENERAL
CHAPTER 1106. REINSTATEMENT OF CERTAIN LIFE INSURANCE POLICIES
Sec. 1106.001. APPLICABILITY OF CHAPTER. (a) This chapter
applies to each individual life insurance policy issued to a
resident of this state by an insurer authorized to engage in the
business of insurance in this state, including a stipulated
premium company and a fraternal benefit society, that is subject
to lapse on or after September 1, 1995.
(b) This chapter does not apply to a life insurance policy that
provides nonforfeiture benefits in accordance with the
requirements of this code.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,
2003.
Sec. 1106.002. REINSTATEMENT REQUIRED; EXCEPTION. (a) On the
lapse of an individual life insurance policy following the
unintentional default in the payment of premiums caused by the
mental incapacity of the insured, a person is entitled to have
the policy reinstated under this chapter if:
(1) the policy had been in effect continuously for at least five
years immediately preceding the lapse; and
(2) there was not a default in the payment of premiums on the
policy during the period described by Subdivision (1).
(b) The insurer is not required to reinstate a policy or pay
benefits under this chapter if the insured first became mentally
incapacitated after the expiration of an applicable grace period
contained in the policy.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,
2003.
Sec. 1106.003. MENTAL INCAPACITY DEFINED. In this chapter,
"mental incapacity" means a lack of the ability to:
(1) understand and appreciate the nature and consequences of a
decision regarding the failure to pay a premium when due; and
(2) reach an informed decision in the matter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,
2003.
Sec. 1106.004. DIAGNOSIS OF MENTAL INCAPACITY REQUIRED. For
purposes of this chapter, mental incapacity must be:
(1) established by the clinical diagnosis of a physician
licensed in this state who is qualified to make the diagnosis;
and
(2) based on reasonable medical judgment.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,
2003.
Sec. 1106.005. REQUEST FOR REINSTATEMENT; LIMITATION. (a) A
request for reinstatement of a policy under this chapter and
proof of mental incapacity may be filed with the insurer by:
(1) the insured;
(2) the insured's legal guardian or other legal representative;
or
(3) the legal representative of the insured's estate.
(b) The request and the proof of mental incapacity must be filed
not later than the first anniversary of the date the policy
lapses.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,
2003.
Sec. 1106.006. REINSTATEMENT. (a) After the requirements of
Section 1106.005 have been satisfied, the insurer shall reinstate
the policy.
(b) The policy must be reinstated within one year from the date
of lapse on payment of:
(1) the premiums owed from the date of initial lapse to the date
of reinstatement; and
(2) interest on the premiums at a rate not to exceed six percent
a year for the period.
(c) The insurer may not require evidence of insurability as a
condition of reinstatement.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,
2003.
Sec. 1106.007. EFFECT OF REINSTATEMENT. On reinstatement of the
policy, the original contractual provisions apply as if the
coverage had been continuous.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,
2003.
Sec. 1106.008. REDUCTION IN BENEFITS. If there is an
uncontroverted claim for benefits in an amount that exceeds the
amount of premiums and interest owed and unpaid under a policy
that is eligible for reinstatement under this chapter, the
insurer shall pay the amount of benefits owed reduced by the
amount of premiums and interest owed and unpaid on the date the
benefits are paid.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,
2003.
Sec. 1106.009. DISCLOSURE. (a) Each insurer shall disclose
fully to each policyholder or insured the requirements of this
chapter.
(b) As to a policy to which this chapter applies that was issued
on or after September 1, 1995, an insurer may make the disclosure
required by Subsection (a):
(1) not later than the 90th day after the date the policy
lapses; or
(2) by including the disclosure information in the policy or in
an endorsement attached to the policy.
(c) As to a policy to which this chapter applies that was issued
before September 1, 1995, and for which the insurer did not make
the required disclosure on or before November 30, 1995, the
insurer shall make the disclosure required by Subsection (a) not
later than the 90th day after the date the policy lapses.
(d) Notice is considered to comply with Subsection (b) or (c) if
the notice is mailed by first class mail to the last known
address of the policyholder.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,
2003.
Sec. 1106.010. RULES. The commissioner shall adopt reasonable
rules to implement this chapter, and the disclosure required by
Section 1106.009 must be made in the form and manner prescribed
by the commissioner after notice and hearing.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,
2003.