The bill, introduced by Paul H.B. No. 3960, amends the Texas Insurance Code to clarify the implications of misrepresentations made by policyholders or applicants in insurance applications. Key changes include the addition of the term "applicants" to the heading of Chapter 705, which now addresses misrepresentations by both policyholders and applicants. The bill establishes that certain misrepresentations do not invalidate insurance policies unless they are determined to be material and fraudulent. It also introduces a new section that asserts the chapter's provisions take precedence over common law regarding misrepresentations in insurance applications.

Furthermore, the bill specifies that insurers can rescind life insurance policies within two years of issuance if misrepresentations are found to be material, without needing to prove fraud. Insurers are required to notify the insured or beneficiaries of any rescission within 90 days of discovering the misrepresentation. The bill also clarifies that it applies only to insurance policies issued or renewed on or after January 1, 2026, ensuring that existing policies are governed by the previous law. The act is set to take effect on September 1, 2025.

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)