Texas Administrative Code
Title 28 - INSURANCE
Part 1 - TEXAS DEPARTMENT OF INSURANCE
Chapter 3 - LIFE, ACCIDENT, AND HEALTH INSURANCE AND ANNUITIES
Subchapter I - VARIABLE LIFE INSURANCE
Section 3.804 - Insurance Contract and Filing Requirements

(A) Each variable life contract, rider, endorsement, and application must be filed in accordance with Subchapter A of this chapter (relating to Submission Requirements for Filings and Departmental Actions Related to Such Filings. A flexible premium variable life contract submission must be accompanied by the following:

(B) The commissioner may approve variable life contracts and related forms with provisions the commissioner deems to be not less favorable to the contractholder and the beneficiary than those required by these rules.

(A) Mortality and expense risks must be borne by the insurer. The expense charges must be subject to the maximums stated in the contract. The charge for mortality must be stated in the contract and may not exceed a mortality rate for the attained age of the insured in a table specified for the calculation of cash surrender values in Insurance Code Chapter 1105. Provided, for insurance issued on a substandard basis, the charge for mortality may be the mortality rate for the attained age of the insured in such other tables as may be specified by the company and approved by the Texas Department of Insurance.

(B) For scheduled premium contracts, a minimum death benefit must be provided in an amount at least equal to the initial face amount of the contract so long as premiums are duly paid (subject to paragraph (4) of this section).

(C) The contract must reflect the investment experience of one or more separate accounts established and maintained by the insurer. The insurer must demonstrate that the reflection of investment experience in the variable life contract is actuarially sound.

(D) Each variable life contract must be credited with the full amount of the net investment return applied to the benefit base.

(E) Any changes in variable death benefits of each variable life contract must be determined at least annually.

(F) The cash surrender value of each variable life contract must be determined at least monthly. The method of computation of cash surrender values and other nonforfeiture benefits, as described in the contract and in a statement filed with the commissioner in this state in which the contract is delivered, or issued for delivery, must be in accordance with recognized actuarial procedures that recognize the variable nature of the contract. The method of computation must be such that if the net investment return credited to the contract at all times from the date of issue should be equal to the assumed investment rate with premiums and benefits determined accordingly under the terms of the contract, then the resulting cash surrender values and other nonforfeiture benefits must be at least equal to the minimum values required by Insurance Code Chapter 1105, for a general account contract with such premiums and benefits. The assumed investment rate may not exceed the maximum interest rate permitted under Insurance Code Chapter 1105. If the contract does not contain an assumed investment rate, this demonstration must be based on a rate not to exceed the maximum interest rate permitted under Insurance Code Chapter 1105. The method of computation may disregard incidental minimum guarantees as to the dollar amounts payable. Incidental minimum guarantees include for example, but are not limited to, a guarantee that the amount payable at death or maturity is at least equal to the amount that otherwise would have been payable if the net investment return credited to the contract at all times from the date of issue had been equal to the assumed investment rate.

(A) The cover page or pages corresponding to the cover page of each contract must contain:

(B) A grace period in accordance with this subparagraph.

(C) For scheduled premium contracts, a provision that the contract will be reinstated at any time within two years from the date of default upon the written application of the insured and evidence of insurability, including good health, satisfactory to the insurer, unless the cash surrender value has been paid or the period of extended insurance has expired, upon the payment of any outstanding indebtedness arising subsequent to the end of the grace period following the date of default together with accrued interest thereon to the date of reinstatement and payment of an amount not exceeding the greater of:

(D) A full description of the benefit base and of the method of calculation and application of any factors used to adjust variable benefits under the contract.

(E) A provision designating the separate account to be used and stating that:

(F) A provision specifying what documents constitute the entire insurance contract.

(G) A designation of the officers who are empowered to make an agreement or representation on behalf of the insurer and an indication that statements by the insured, or on his or her behalf, are considered as representations and not warranties.

(H) An identification of the owner of the insurance contract.

(I) A provision setting forth conditions or requirements as to the designation, or change of designation, of a beneficiary and a provision for disbursement of benefits in the absence of a beneficiary designation.

(J) A statement of any conditions or requirements concerning the assignment of the contract.

(K) A description of any adjustments in benefits under the contract to be made in the event of misstatement of age or sex of the insured.

(L) A provision that the contract will be incontestable by the insurer after it has been in force for two years during the lifetime of the insured, provided, however, that any increase in the amount of the contract's death benefits subsequent to the contract issue date, which increase occurred upon a new application or request of the owner and was subject to satisfactory proof of the insured's insurability, will be incontestable after any such increase has been in force, during the lifetime of the insured, for two years from the date of issue of such increase.

(M) A provision stating that the investment policy of the separate account may not be changed without the approval of the insurance commissioner of the state of domicile of the insurer, and that the approval process is on file with the commissioner of this state.

(N) A provision that the payment of variable death benefits in excess of any minimum death benefits, cash surrender values, contracts loans, or partial withdrawals (except when used to pay the premiums) or partial surrenders may be deferred:

(O) If settlement options are provided, at least one such option must be provided on a fixed basis only.

(P) A detailed and complete definition for the basis for computing the contract value and the cash surrender value of the contract. For flexible premium variable life contracts, the definition must include the following:

(Q) Premiums or charges for incidental insurance benefits must be stated separately.

(R) Any other contract provisions required by this subchapter.

(S) Such other items as are currently required for fixed benefit life insurance contracts and are not inconsistent with this subchapter.

(T) A provision for nonforfeiture insurance benefits. The insurer may establish either a reasonable minimum cash surrender value amount, or a reasonable death benefit which may be purchased under any nonforfeiture option, below which any nonforfeiture option will not be available.

(U) If a flexible premium contract does not provide for a guarantee of death benefit coverage, but does provide for a "maturity date," "end date," or similar date, then the contract must also contain a statement, in close proximity to that date, that it is possible that the coverage may not continue to the maturity date even if scheduled premiums are paid in a timely manner.

(A) A provision for contract loans after the contract has been in force for one full year which provides the following:

(B) For scheduled premium contracts, whenever the indebtedness exceeds the cash surrender value, the insurer must give notice of any intent to cancel the contract if the excess indebtedness is not repaid within 31 days after the date of mailing of such notice. For flexible premium contracts, whenever the total charges authorized by the contract that are necessary to keep the contract in force until the next following contract processing day exceed the amounts available under the contract to pay such charges, a report must be sent to the contractholder containing the information specified by § 3.809(3) of this title (relating to Reports to Contractholders).

(C) The contract may provide that if, at any time, so long as premiums are duly paid, the variable death benefit is less than it would have been if no loan or withdrawal had ever been made, the contractholder may increase such variable death benefit up to what it would have been if there had been no loan or withdrawal by paying an amount not exceeding 110% of the corresponding increase in cash surrender values and by furnishing such evidence of insurability as the insurer may require.

(D) The contract may specify a reasonable minimum amount which may be borrowed at any time, but such minimum may not apply to any automatic premium loan provision.

(E) No contract loan provision is required if the contract is under extended insurance nonforfeiture option.

(F) The contract loan provisions must be constructed so that variable life insurance contractholders who have not exercised such provisions are not disadvantaged by the exercise thereof.

(G) Amounts paid to the contractholders upon the exercise of any contract loan provision must be withdrawn from the separate account and must be returned to the separate account upon repayment except that a stock insurer may provide the amounts for contract loans from the general account.

(A) an exclusion for suicide within two years of the issue date of the contract, provided, however, that to the extent of the increased death benefits only, the contract may provide an exclusion for suicide within two years of any increase in death benefits which result from an application or request of the owner subsequent to the contract issue date;

(B) incidental insurance benefits may be offered on a fixed or variable basis;

(C) contracts issued on a participating basis must offer to pay dividend amounts in cash. In addition, such contracts may offer the following dividend options:

(D) a provision allowing the contractholder to elect in writing in the application for the contract or thereafter an automatic premium loan on a basis not less favorable than that required of contract loans under paragraph (4) of this section, except that a restriction that no more than two consecutive premiums can be paid under this provision may be imposed;

(E) a provision allowing the contractholder to make partial withdrawals; and/or

(F) any other contract provision approved by the commissioner.