State RegulationsTX specificDifficulty 1/5
What does the Texas standard nonforfeiture law guarantee to a policyowner whose life policy lapses after a cash value has accrued?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under TIC Chapter 1105 (1105.001-.153) and 28 TAC 3.3844, a life insurance policy subject to the standard nonforfeiture law must provide values at least equal to the statutory minimums, so when the policy lapses after values have accrued the owner may elect the cash surrender value, reduced paid-up insurance, or extended term insurance rather than losing the accumulated reserve. Practically, a Texas agent should explain these options at the lapse notice stage, because doing nothing simply lets the policy's value run out under whatever benefit applies.
Why the other options are wrong
- A) is wrong because the nonforfeiture benefit is the policy's value, not a refund of all premiums with interest.
- B) is wrong because coverage after lapse is purchased with the policy's value; no coverage is provided free.
- D) is wrong because reinstatement is a separate contractual right with its own conditions; it is not the nonforfeiture guarantee.
Memory hook
Cash, paid-up, or term: the value never disappears.