Texas Life Insurance Policy Laws
The laws regarding life insurance in the state of Texas come from Title 17 of the Texas Insurance Code. These laws outline life insurance policy sales guidelines and protections offered to policyholders who live in the state. You should understand some of the basic protections and laws in Texas prior to buying a policy.
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Grace Period
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Life insurance companies must give you a 30-day grace period when missing premium payments. If you buy a policy and miss one of the premium payments, you have 30 days to pay the overdue premium. The insurance company cannot cancel your coverage during this grace period.
Settlement Period
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The insurance company must start your claims process within 15 days of receiving a claim form and copy of the death certificate. The insurance company must fully process the claim within two months of the original claim. Claims taking longer than 15 days require the insurer to invest the proceeds in the general account of the insurance company and pay interest on the death benefit amount until the claim is paid.
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Guaranty Association
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Texas life insurance policies are protected against insurance company insolvency by the Texas Life, Accident, Health & Hospital Service Insurance Guaranty Association. This guaranty association ensures that you'll receive no less than $300,000 of death benefit for a claim you make if an insurer becomes insolvent. The state also guarantees $100,000 of cash value for any policy you own which has a cash value savings element associated with the policy.
Creditor Collection
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Texas has strong protections for life insurance policies. Life insurance proceeds are protected by the Texas Insurance Code section 21.22. All proceeds of the policy, including the cash value, are wholly exempt from creditors. This exemption is still subject to the court's interpretation of the statutes, however, and any civil action you are involved in does not necessarily guarantee that your policy will be 100 percent exempt. In general, the statues do provide for full exemption.
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