The bill, H.B. No. 3960, amends the Texas Insurance Code to clarify the implications of misrepresentations made by policyholders or applicants in insurance applications, particularly concerning life insurance policies. Key changes include the addition of provisions that specify the applicability of the subchapter to life insurance policies and establish that misrepresentations do not defeat recovery under a policy unless they are material and affect the risks assumed. The bill also introduces a new section that allows insurers to rescind or terminate life insurance policies within two years of issuance based on misrepresentations, provided that the misrepresentation is material and the premium is refunded.

Additionally, the bill modifies existing language to emphasize that the chapter takes precedence over common law regarding misrepresentations and clarifies the conditions under which insurers can contest misrepresentations. It stipulates that insurers must notify policyholders of rescission or termination within 90 days of discovering a misrepresentation. The changes will take effect for insurance policies delivered, issued for delivery, or renewed on or after January 1, 2026, while policies issued before this date will be governed by the previous law.

Statutes affected:
Introduced: Insurance Code 705.002, Insurance Code 705.003, Insurance Code 705.004, Insurance Code 705.051, Insurance Code 705.101, Insurance Code 705.105 (Insurance Code 705)
House Committee Report: Insurance Code 705.002, Insurance Code 705.003, Insurance Code 705.004, Insurance Code 705.051, Insurance Code 705.101, Insurance Code 705.105 (Insurance Code 705)
Engrossed: Insurance Code 705.002, Insurance Code 705.003, Insurance Code 705.004, Insurance Code 705.051, Insurance Code 705.101, Insurance Code 705.105 (Insurance Code 705)