Life insurance policies may reduce benefits in specified situations, but must clearly disclose any reduction or exclusion and meet minimum 120% value rules in certain reduction or increase arrangements.
Sec. 884.356. LIFE INSURANCE BENEFIT REDUCTIONS OR INCREASES. (a) A life insurance policy may provide for reduced benefits if the insured: (1) dies or is injured while engaged in: (A) military, naval, or aerial service or aerial flight during peace or war; or (B) a hazardous occupation specified in the policy; or (2) dies by the insured's own hand, regardless of whether the insured is sane or insane. (b) The front page of a life insurance policy must call attention to any reduction or exclusion of benefits provided by the policy. The circumstances or conditions under which the reduction or exclusion applies must be stated plainly in the policy. (c) If a policy that provides natural death benefits contains a provision for reducing the greatest death benefit provided by the policy for a specified insured for a reason other than a reason specified by Subsection (a): (1) the reduced death benefit for the insured must at all times when the reduction is in effect equal or exceed 120 percent of the total premium paid on that policy by the insured; and (2) the reduction must end before the fifth anniversary of the date the policy is issued. (d) Subsection (c) does not apply to a life insurance policy on which the reduction of the death benefit does not apply at the time of the death of the insured. (e) If a life insurance policy provides for an increase of the initial amount of the death benefit for a specified insured one or more times during the first five years of the policy, the amount of death benefit for the insured must at all times during the period of the increasing benefit equal at least 120 percent of the premiums paid on that policy by the insured during the period of the increase. (f) Subsection (e) does not apply to a life insurance policy that has been in force for more than five years from the date the policy is issued. (g) This section does not apply to a family group life insurance policy described by Section 884.451(b). Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.