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Zero Premium Life Insurance

TDI urges consumers to proceed with caution if they're asked to participate in what is commonly called a "zero premium life insurance policy." The policies are most often sold to people between the ages of 65 and 85. In these arrangements, the policy is owned by a stranger and the consumer receives a lump sum payment or the consumer's beneficiaries receive a portion of the death benefit. These nontraditional products in the stranger-owned life insurance market are also called "estate maximization plans" or "no cost to the insured" policies.

Life Insurance

Life insurance helps protect the people who depend on you for financial support. It can help pay final expenses and other expenses that the insured would have paid for through earnings, including mortgage payments, bills, dependent or child care, and college tuition. Insurance agents and companies must be licensed by TDI to legally sell life insurance in the state.  To learn more about life insurance, read TDI's Understanding Life Insurance publication.

Viaticals and Life Settlements

Texas law allows people, with certain limitations, to designate any other person or legal entity, including strangers, as the beneficiary or owner of an existing policy on his or her life. The sale of an existing life insurance policy is referred to as a “life or viatical settlement” contract and typically occurs after the policy has been in effect for a period of time. Viatical and life settlement providers and brokers are required to hold a certificate of registration issued by TDI. Texas law prohibits the offer of rebates or inducements to enter into life insurance contracts.

Consumer Tips

If you are considering:

  • allowing a stranger to purchase life insurance on your life in exchange for an immediate lump sum payment of some amount;
  • allowing a stranger to purchase insurance on your life in exchange for a partial payment of the policy’s face value to your beneficiaries upon your death;
  • entering into a contract for “free” or “no-cost” insurance on your life;
  • buying a life insurance policy for the sole purpose of selling the policy; or
  • materially participating in transactions leading up to the purchase of a life policy for the above-stated purposes.

TDI offers the following suggestions:

  • Know what company you are applying with by inspecting the insurance application closely.
  • Be cautious if your application is being sent to more than one company and multiple insurance policies are being bought on your life.
  • Get a sample copy of the policy for which you are applying.
  • Be careful about disclosing confidential health and financial information.
  • Consider any potential tax consequences of the amount offered to you for allowing someone to purchase insurance on your life. Discuss this issue with an attorney or a tax consultant.
  • Understand that the policy may count as an asset when determining eligibility for public benefits, such as Medicaid long-term care benefits.
  • Confirm that all pople and entities involved in your transaction are properly licensed and registered by TDI. Agent, insurer, premium finance company and life or viatical settlement provider and broker licensure and registration can be verified on TDI’s website or by calling the Consumer Help Line at 1-800-252-3439.
  • Remember that filing an application for insurance containing materially false information may be prosecuted as insurance fraud and subject you to civil and criminal penalties.
  • Get all details about the program and have a complete understanding of your obligations. If necessary, discuss this information with an attorney.

Get Help from TDI

For insurance questions or for help with an insurance-related complaint, call our Consumer Help Line or visit our website.

For more information, contact:

Last updated: 04/12/2016

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