SECTION 4.621. Settlement at Maturity

(a) If the policy provides that proceeds may be paid in installments, it must contain a representative table showing the amounts of such installments.

(b) If the settlement options provision indicates that modes of payment other than monthly may be available, then the amount of such payments must be determinable from the text. If the settlement option indicates a commuted value or present value, to be paid upon death of a payee, the interest rate used to determine this value must be given.

(c) No policy may contain a provision for any mode of settlement at maturity of less value than the amount insured on the face of the policy, plus dividend additions, if any, less any indebtedness to the company on the policy, and less any premium that may, by the terms of the policy, be deducted. The policy may provide an exception to this general rule, and reduce the amount of insurance payable on maturity if death occurs from the following causes:

(1) suicide, while sane or insane;

(2) by following stated hazardous occupations; or

(3) from aviation activities under conditions specified by the policy.

(d) Status clauses that attempt an exception if death occurs while the insured is engaged in the hazardous occupation or aviation activity are prohibited.

(e) Military service may be classed as a hazardous occupation, and benefits may be reduced under authority of this exception. In the alternative, the insurer may, in the incontestable clause, make provisions for contesting the validity of the policy for violations of conditions relating to naval and military services in time of war.

(f) Policies with graded death benefits, such as juvenile policies, will not be approved if they provide for reduction in the amount insured on the face of the policy. Such policies can properly be written by providing the lower amount of insurance in the face of the policy, and making appropriate provisions for increases; or, in the alternative, the in-force insurance at the various durations may be stated in the face of the policy.

(g) The policy must not provide for deduction of all indebtedness of the holder of the contract to the company. The only allowable deduction for indebtedness is an indebtedness on account of and secured by the policy.

Source Note: The provisions of this §4.621 adopted to be effective January 1, 1976; amended to be effective September 20, 1982, 7 TexReg 3244; transferred effective September 1, 2023, as published in the July 28, 2023, issue of the Texas Register, 48 TexReg 4127; amended to be effective January 24, 2024, 49 TexReg 250