7.2 Texas Marketing & Policy Requirements

Free-Look Periods

Texas guarantees every policyowner a free-look (right-to-examine) period during which a newly issued contract may be returned for a full refund of premium. The free look begins when the policy is delivered to the owner.

• New annuity: at least 20 days after delivery to rescind (TIC 1116.002). Fixed annuities refund premiums including contract fees; variable or modified guaranteed annuities refund the cash surrender value plus fees and charges (accredited investors excepted).
• Replacement life or annuity: the replacing insurer must notify the owner of the right to return the policy or contract within 30 days of delivery for a full refund (TIC 1114.053(e)).
• Annuity disclosures missing: if the annuity Buyer's Guide and disclosure document are not provided at or before application, the annuity must allow a free look of at least 15 days, running concurrently with any other free look (28 TAC 3.9711).

During the free-look period the owner may cancel for any reason and the insurer must refund all premium paid (for variable contracts, the refund may reflect the contract's account value plus charges, depending on the form). The free look is a right of the policyowner, not the agent, and it cannot be waived; an agent who tells a client they have less time than the law allows has made a misrepresentation. The clock runs from delivery, so proof-of-delivery practices (a signed delivery receipt) matter when a dispute arises over whether a return was timely.

Required Policy Provisions and Disclosure Delivery

Texas adopts the standard required policy provisions for individual life insurance, including the grace period (at least one month under TIC 1101.005), incontestability (the policy cannot be contested after it has been in force two years, except for nonpayment of premium), the entire contract clause, reinstatement, the misstatement-of-age provision (benefits adjusted to what the premium would have purchased at the correct age), and a suicide exclusion limited to the first two policy years.

Buyer's Guide and policy summary

For life insurance solicitations, the agent must deliver:

• A Buyer's Guide — a generic educational booklet explaining how to shop for life insurance; and
• A policy summary (and, for cost-comparison, the relevant disclosure document) showing premiums, benefits, cash values, and surrender values specific to the policy applied for.

These must be delivered no later than the time the policy is delivered.

Annuity disclosure

For annuities, Texas requires a separate annuity disclosure document describing the contract's guaranteed and non-guaranteed elements, surrender-charge schedule and surrender period, market-value adjustment (if any), fees, and tax consequences of early withdrawal. The disclosure and the Buyer's Guide to fixed deferred annuities must reach the applicant no later than the time the contract is delivered, mirroring the life-insurance rule. These disclosure duties tie directly into the annuity suitability and best-interest standard covered in Section 7.4.

Replacement, Illustrations, and Advertising

Replacement regulation

A replacement occurs when a new life or annuity contract is purchased and, in connection with the sale, an existing policy is lapsed, surrendered, reduced, or borrowed against. Texas replacement rules require the agent to:

1. Present and read a signed Notice Regarding Replacement to the applicant.
2. Obtain a list of all existing policies to be replaced (policy numbers and insurers).
3. Leave the applicant copies of all sales materials; and
4. The replacing insurer must notify the existing insurer, which then has the right to conserve the business by contacting the policyowner.

Replacement is not illegal, but unnecessary replacement that harms the consumer to generate commission is prohibited and is the basis for the unfair practices of twisting and churning discussed in Section 7.3.

Illustrations and advertising

The NAIC Life Insurance Illustrations model (adopted by Texas) governs how interest-sensitive and universal life illustrations are shown: they must be clearly labeled, distinguish guaranteed from non-guaranteed elements, and be signed by the applicant and agent. Under 28 TAC Chapter 21, life and annuity advertising must not be untrue, deceptive, or misleading; may not use deceptive words such as implying a policy is "free" or a deposit; and may not reference the Texas Life and Health Insurance Guaranty Association as a sales inducement.

Premium financing

When a third party finances premiums, the arrangement must be disclosed in writing, including the interest rate, the amount financed, and the consequences of default (the lender may surrender the policy to recover the loan). Premium financing may not be used to disguise an illegal rebate or inducement, and an agent may not misrepresent a financed sale as "no-cost" coverage. Texas also scrutinizes stranger-originated life insurance (STOLI) arrangements, where financing is used to manufacture coverage for resale to investors who lack an insurable interest — such arrangements are prohibited because insurable interest must exist at policy issue.

Marketing to the public

All sales presentations and solicitation materials, including online and social-media advertising, fall under the same advertising rules: claims must be truthful, the insurer's full name must be identifiable, and the agent must not present themselves as a financial planner or use a misleading title they are not entitled to. Testimonials must be genuine and may not imply guaranteed results.