Life Insurance Policy Limitations That Are Illegal

Fort Worth life insurance lawyers need to know about these sections of the Texas Insurance Code that prohibit certain limitations in a life insurance policy.
Here’s the first one to know:
Texas Insurance Code, Section 1101.053. This sections says that “A life insurance policy may not include a provision that limits the time during which an action under the policy may be commenced to a period of less than two years after the cause of action accrues.”
So what does this mean? It is pretty simple on it’s face but some policies will make a shorter period and if someone does not realize that the limitations is illegal may think they are too late if and when they file a claim.
A lesson to be taken from section 1101.053 is that policies will limit the time to two years legally. The problem with this is that an insurance policy is a contract. Contracts in Texas have a normal four year statute of limitations. Insurance companies will often times legally shorten this period to two years. Beware!
Texas Insurance Code, Section 1101.054. This section tells us a life insurance policy cannot purport to take effect more than six months before the original application date, if that would qualify the insured for a rate based on a younger age. This can be referred to as a retroactive issuance or effect. Most people would like for this to be the case because it would usually result in a lower premium. But it also has the insured paying for coverage for a death that certainly has not occurred, thus the insurance company is getting a “free ride” for six months.
Texas Insurance Code, Section 1101.055. This section says “A life insurance policy may provide for a settlement that will be less than the amount required … if the death of the insured is: (1) by the insured’s own hand regardless of whether the insured is sane or insane; (2) caused by following a hazardous occupation that is stated in the policy; or (3) the result of aviation activities under conditions specified in the policy and approved by the Department of Insurance.”
As to the suicide provision in 1101.055, most policies exclude coverage during the first two years of a policy if death results from suicide during that time frame.
Texas Insurance Code, Sections 705.001 to 705.004. This section is really important to people who have a life insurance policy. And to lawyers who handle life insurance claims. These sections tell us that a life insurance company cannot issue a policy that contains provisions stating that untrue or false statements in an application render the policy void. Section 705.004 tells us “It is a question of fact whether a misrepresentation made in the application for the policy or in the policy itself was material to the risk or contributed to the contingency or event on which the policy became due and payable.”
This is especially important to life insurance attorneys who represent claimants because it means that a Judge is not suppose to grant a motion for summary judgment filed by an insurance carrier on this point.