Texas Life Insurance Policy Provisions Explained

Q: When does a life policy become incontestable?

After two years from the date of issue. 2

Q: How long can an insurer delay a policy loan?

Up to six months after the application. 2

Policy provisions are the fine print that decides what happens when a premium is late, a loan is taken or a claim is filed. They are also one of the heaviest topics on the Texas life and health exam.

Many of them come with a number: a month, two years, six months. Those numbers are easy to mix up, so it helps to learn them together with the idea behind each one.

This guide explains the main provisions in plain words and points to the Texas Insurance Code. This site is independent and is not affiliated with the Texas Department of Insurance (TDI) or Pearson VUE.

In short

Riders and provisions make up 15 of the 100 scored general questions, and the Texas life-only section has 6 more.¹
The grace period is at least one month. Incontestability is two years.²
An insurer may defer a policy loan for up to six months.²
Settlement of a death claim is due within two months of proof of death.²
Nonforfeiture options (cash, reduced paid-up, extended term) are governed by Chapter 1105.³

Contents

Grace period
Incontestability
Free look
Policy loans
Nonforfeiture options
Settlement options
Riders
Common questions
Sources

Grace period

The grace period is extra time to pay a late premium. The policy stays in force during it. A Texas individual life policy must give a grace period of at least one month.²

If the insured dies during the grace period, the insurer can subtract the unpaid premium from the death benefit.

Many policies also have an automatic premium loan. It uses cash value to pay an overdue premium so the policy does not lapse.¹

Incontestability

After the policy has been in force for a set time, the insurer can no longer contest it for misstatements in the application. In Texas the period is two years from the date of issue.²

There are limits. The clause does not stop an insurer from refusing payment if premiums were never paid. During the first two years, a material misstatement can still be a reason to contest a claim.

Related provisions are entire contract (the policy and the attached application make up the contract) and misstatement of age (the benefit is adjusted, the policy is not voided).¹

Free look

The free look gives the owner a short period after delivery to cancel the policy and get the premium back. The outline lists the Texas rule for this under the Texas Administrative Code, 28 TAC section 4.2311.¹

For exam purposes, remember that the clock starts at delivery, not at application. This is why delivering the policy and explaining it is an agent duty.

Policy loans

A policy with cash value lets the owner borrow against it. The loan is secured by the cash value, interest is charged, and an unpaid loan reduces the death benefit.

Texas lets the insurer defer making a loan, but only for a limited time: up to six months after the loan application.² Withdrawals and partial surrenders are listed next to loans in the outline.¹

Nonforfeiture options

Nonforfeiture options protect an owner who stops paying premiums on a policy that has built cash value. Texas sets these rules in Chapter 1105 of the Insurance Code, the standard nonforfeiture law.³

Option	What you get
Cash surrender	The cash value in a lump sum, and the coverage ends
Reduced paid-up	A smaller paid-up policy of the same type, no more premiums
Extended term	The original face amount as term insurance for as long as the cash value will buy

Extended term is the usual default if the owner does not choose.¹

Settlement options

Settlement options are the ways a beneficiary can take the death benefit. A Texas policy must provide that a claim is settled within two months after proof of death and of the claimant's right to the proceeds.²

Lump sum: everything at once.
Interest only: the proceeds stay with the insurer and the beneficiary receives the interest.
Fixed period: equal payments for a set number of years.
Fixed amount: the same dollar amount until the funds run out.
Life income: payments for the life of the beneficiary.

The outline lists settlement options among the policy provisions you must know, together with accelerated death benefits.¹

Riders

A rider adds or changes coverage. The outline names these life riders:¹

Waiver of premium and waiver of monthly deduction
Guaranteed insurability
Payor benefit
Accidental death and accidental death and dismemberment
Term riders and other insureds
Long term care, return of premium, disability and cost of living

Riders usually cost extra premium. The exam often asks which rider fits a described need, so tie each name to one sentence.

Keep going

Provisions are only one part of the exam. See the exam format and topic weights, then Start a practice test on provisions to check the numbers stick. The full path to a license is in how to get a license in Texas.

Common questions

How long is the grace period on a Texas life policy?

At least one month.²

When does a life policy become incontestable?

After two years from the date of issue.²

How long can an insurer delay a policy loan?

Up to six months after the application.²

What is the default nonforfeiture option?

Extended term is the usual default when the owner makes no choice.¹

Sources

The section numbers come from the Texas Insurance Code, and the topic list comes from the Pearson VUE content outline effective September 1, 2026. Statute text can be amended, so check the current version. This site is independent and is not affiliated with TDI or Pearson VUE.