Tex. Ins. Code Section 1111A.013
Disclosure to Insurer


Without limiting the ability of an insurer to assess the insurability of a policy applicant and to determine whether to issue the policy, and in addition to other questions an insurance carrier may lawfully pose to a life insurance applicant, an insurer may inquire in the application for insurance whether the proposed owner intends to pay premiums with the assistance of financing from a lender that will use the policy as collateral to support the financing.


If, as described in Sections 1111A.002 (Definitions)(11) and (11-A), the loan provides funds that can be used for a purpose other than paying for the premiums, costs, and expenses associated with obtaining and maintaining the life insurance policy and loan, and notwithstanding any other law, the application must be rejected as a violation of Section 1111A.017 (Prohibited Practices).


If the financing does not violate Section 1111A.017 (Prohibited Practices), the insurance carrier:


may make disclosures, not later than the date of the delivery of the policy, to the applicant and the insured, either on the application or on an amendment to the application that include the following or substantially similar statements:
"If you have entered into a loan arrangement in which the policy is used as collateral, and the policy does change ownership at some point in the future in satisfaction of the loan, the following may be true:


a change of ownership could lead to a stranger owning an interest in the insured’s life;


a change of ownership could in the future limit your ability to purchase future insurance on the insured’s life because there is a limit to how much coverage insurers will issue on one life;


should there be a change of ownership and you wish to obtain more insurance coverage on the insured’s life in the future, the insured’s higher issue age, a change in health status, or other factors may reduce the ability to obtain coverage or may result in significantly higher premiums; and


you should consult a professional advisor, since a change in ownership in satisfaction of the loan may result in tax consequences to the owner, depending on the structure of the loan.";


may require certifications, such as the following, from the applicant or the insured:


“I have not entered into any agreement or arrangement providing for the future sale of this life insurance policy”;


“My loan arrangement for this policy provides funds sufficient to pay for some or all of the premiums, costs, and expenses associated with obtaining and maintaining my life insurance policy, but I have not entered into any agreement by which I am to receive consideration in exchange for procuring this policy”; and


“The borrower has an insurable interest in the insured.”
Added by Acts 2011, 82nd Leg., R.S., Ch. 1156 (H.B. 2277), Sec. 3, eff. September 1, 2011.

Source: Section 1111A.013 — Disclosure to Insurer, https://statutes.­capitol.­texas.­gov/Docs/IN/htm/IN.­1111A.­htm#1111A.­013 (accessed Dec. 2, 2023).

Dec. 2, 2023

§ 1111A.013’s source at texas​.gov