Texas Department of Insurance

What Texans in the Military Should Know About Insurance

Approximately 14,000 servicemembers who purchased certain life insurance products have yet to claim more than $2.3 million from a 2006 multistate settlement agreement with American-Amicable Life Insurance Company and its two Texas affiliates. The National Association of Insurance Commissioners (NAIC) released a website on April 23, 2009, to help servicemembers recover their money. Military Servicemember Policyholder Search

• NAIC news release (April 23, 2009)
• Texas Department of Insurance (TDI) news release (April 23, 2009)
• Red Flag alert

(September 2009)

Members of the armed services can be deployed on short notice, leaving little time to address their personal or business affairs. Insurance coverage, in particular, is often affected when someone moves out of state or spends an extended period of time away from home.

You should review your insurance coverage before you deploy to decide if the coverage amounts will meet your needs while you’re away. You can also consider buying additional coverage or policies, suspending coverage, and paying premiums to avoid unintended lapses or cancellations in coverage.

Overview

Before you purchase any insurance policy, ask the agent or broker specific questions about how the company will handle issues that may arise when you’re deployed. Company guidelines can vary. By shopping around, you may be able to find an insurer who can accommodate your specialized needs.

For instance, it might be difficult to handle routine business like paying premiums on time or renewing policies when you’re deployed. Before you leave, ask your agent when your policy is due for renewal and how to make arrangements to pay your premiums. You may be able to renew a policy early or have your premiums paid automatically from your bank account.

Some insurance companies might also allow you to suspend certain coverages while you’re deployed. Most insurance companies consider payment history and continuity of coverage to determine eligibility and rates. If your insurance lapses or expires while you’re away, you could come home to find insurance companies unwilling to insure you or only willing to insure you at a higher rate.

If you’re thinking about buying insurance before you’re deployed, consider your needs carefully. Be especially cautious if you or someone in your family is approached about buying health or life insurance products. These types of insurance often involve emotional issues, and some agents may use high pressure or misleading sales tactics. You might also be approached by agents who are former service members.  This can create the impression that they represent the military instead of a particular insurance company. No matter who tries to sell you a policy, even if it’s an agent with the best of intentions, it’s a good idea to shop around and get multiple quotes.

Make sure the agent or insurance company you’re doing business with is licensed in Texas. If you buy insurance from an unlicensed company, your claims could go unpaid if the company becomes insolvent. Selling insurance without a license is against the law in Texas. You can learn whether an agent or company is licensed by calling the Texas Department of Insurance (TDI) Consumer Help Line or by using the Agent Lookup and Company Lookup features on our website

1-800-252-3439
463-6515 in Austin
www.tdi.state.tx.us

Insurance law varies by state. This publication only applies to policies and certificates issued in Texas. If you purchased a policy in another state, the laws of the state where the policy was issued govern the policy. You should contact the department of insurance of the state where your policy was issued for any coverage questions.

Auto Insurance

Suspending Your Coverage

If you will be deployed for an extended period of time and no one will be driving your vehicle while you’re away, you may be able to suspend some or all of your coverage to save money on premiums. An endorsement must be attached to your policy to suspend any coverage.

Not all insurance companies will allow you to suspend coverages. If other people are covered on your policy and suspending the policy is not an option, you could consider removing yourself from the policy while you’re away. Talk to your insurance company or agent to learn whether it’s possible for you to suspend coverage.

• Liability coverage. Texas law requires all drivers in the state to have a minimum amount of liability coverage. This coverage protects others in the event that you or someone driving your car causes an accident. To legally suspend liability coverage, you must demonstrate to your company that your vehicle will be stored in a place where no one can access it. Many military bases provide secure vehicle storage facilities for service members.
• Collision and other than collision (comprehensive) coverage. These coverages protect your vehicle from accidents caused by other people and from damages resulting from other covered losses, such as hail, theft, or fire. Collision and comprehensive coverage may also pay for damages your vehicle sustains while in storage. If you cancel or suspend coverage and your car is stolen or damaged in storage, you may have to pay the full cost of repair or replacement yourself. Carefully consider whether canceling this coverage is in your best interest.
  If you still owe money on your car, your lender will usually require that you keep collision and comprehensive coverage. If you cancel these coverages on a car you still owe money on, the insurance company will notify your lender. The lender will likely buy single-interest automobile physical damage coverage and add the cost to your loan payment. This type of coverage is expensive and protects only the lender.
• Other coverages. You may also have other coverages, such as “uninsured/underinsured motorist,” “medical payments,” and “personal injury protection” coverage. These coverages are optional and provide additional protection for you and others if you’re involved in an accident. If no one will be using your car while you’re deployed, you may be able to suspend these coverages.

Policy Lapses or Cancellations

It’s important that you make arrangements to have your insurance premiums paid on time while you’re deployed. If your insurance company cancels your policy for failure to pay your premium on time – or for any other legal reason – you’ll likely have trouble finding a new insurance policy or finding a policy with the same rate. Many companies will decline to insure drivers who have lapses in their insurance coverage. Companies may also charge higher premiums for lapses longer than 30 days.

Homeowners Insurance

Many homeowners policies have a “vacancy clause” that can be triggered if you’re gone for an extended period. If a vacancy clause is triggered and you suffer a loss, some or all of your coverage may not apply. Some policies, for example, might not pay claims if your house is unoccupied for 60 days or more. The definition of vacancy can vary from one policy to another. Many companies offer an endorsement that will provide coverage for a house that is unoccupied for an extended period. Talk with your insurance agent or company to learn how the company defines vacancy and whether the company will pay claims on a vacant house.

It’s a good idea to review your coverage before you’re deployed. Make sure your policy limits are sufficient to cover your home and your personal property at current costs. You may want to increase your coverage if you’ve made additions or improvements to your property or recently made expensive purchases such as televisions, computers, or stereo equipment.

Personal Property Coverage

You should compile a home inventory of the items you own and their value. Update the inventory regularly or as you acquire items. A home inventory can help you decide if you need additional personal property coverage and can help speed up the process if you ever have a claim.

The military will generally not pay to repair or replace property that is damaged or lost in military housing or in a war zone. Homeowners insurance typically covers personal property that you take with you while traveling, but most policies exclude coverage for damage caused directly or indirectly from war. Ask your agent if personal items you take on your deployment will be covered if they’re lost, stolen, or damaged.

Also, make sure you understand whether you have actual cash value coverage or replacement cost coverage for your property.  Replacement cost coverage will pay to replace your property at the current cost without any deductions taken for depreciation or wear and tear. If your policy only pays the actual cash value, you may be able to buy replacement cost coverage for additional premium.

Renters Insurance

If you have renters insurance for a home or apartment in Texas, your policy will typically pay to repair or replace personal property you take with you while traveling. However, most policies exclude coverage for damage caused directly or indirectly from war. Ask your agent or company whether your renters policy will pay to repair or replace any property you take with you during your deployment. Also, make sure you understand whether you have actual cash value or replacement cost coverage.

Health Care Coverage

Military and Employer Health Plans

Active duty personnel, reservists, and National Guard members receive military health coverage after 30 consecutive days of active duty service. Many reservists and National Guard members, however, already have health coverage for themselves and their families through an employer-sponsored health plan and want to continue the coverage while on active duty. Talk with your benefits administrator at work to learn what will happen with your health coverage if you are called to active duty. While employers are not required to pay the cost of health coverage for you and your dependents while you’re on active duty, some employers choose to do so.

COBRA Protection

If your employer does not continue paying the cost of your health coverage, federal law entitles you to continue the coverage at your own cost if you choose. The Uniformed Services Employment and Reemployment Rights Act (USERRA) and the Consolidated Omnibus Budget Reconciliation Act (COBRA) both allow you to continue coverage for yourself and your dependents.

The cost of the coverage could be up to 102 percent of the full premium for coverage. The full premium includes any amount your employer was paying. Any person covered by the health plan may choose to continue coverage, even if others who are covered do not. This means, for instance, that your spouse could continue coverage through USERRA and COBRA even if you do not.

State Continuation

Texas law allows you to continue coverage for you and your dependents for an additional six months after USERRA or COBRA continuation coverage has ended. Your employer and any insurer or health maintenance organization that provides coverage to you must notify you of your right to continue coverage and tell you how to continue it.

You can continue group coverage for nine months if you’re not eligible for COBRA coverage. If you are eligible, you may continue coverage for an additional six months under state continuation. The 18 months of COBRA coverage and the six months of state continuation allows you 24 months to find new health coverage. If you want to continue coverage, you must notify your employer in writing no later than the 60th day after coverage was terminated.

The “continuation period” begins after any federal COBRA extension period ends or begins immediately if you are not eligible for COBRA coverage.

Before the Texas continuation period ends, your group plan is also required to provide you with information about how to enroll in the Texas Health Insurance Pool.

Federal Premium Assistance
The American Recovery and Reinvestment Act of 2009 provides a 65 percent premium subsidy for up to nine months for employees who are eligible for COBRA and state continuation. To quality, you must

• have been involuntarily terminated between Sept. 1, 2008, and Dec. 31, 2009
• be eligible for and elect COBRA or state continuation coverage
• earn less than $145,000 a year ($290,000 for families)
• pay 35 percent of the premium to the health plan

For more information about your rights under USERRA and COBRA, call the U.S. Department of Labor Employee Benefits Security Administration or visit its website

1-866-444-EBSA (3272)
www.dol.gov/ebsa/

If your employer discontinued your health coverage and you return to the company directly after your military deployment, federal law requires your health plan to resume your coverage without any type of waiting period.

Suspending an Individual Plan

If you have an individual health care plan, you can suspend coverage while you’re on active duty and request to be fully reinstated after release from military service.

The federal Servicemembers Civil Relief Act (SCRA) allows service members to suspend or postpone some civil obligations, including health insurance. The SCRA requires insurance companies to reinstate your insurance with no waiting period when you return from active duty service if the coverage was in effect before you were called to active duty. The reinstatement must be requested in writing no later than 120 days after release from military service. Service members eligible for employer-sponsored health coverage are not entitled to the reinstatement.

For more information about SCRA, call the U.S. Department of Veterans Affairs (VA) or visit its website

1-800-669-8477
www.insurance.va.gov

Life Insurance

Life insurance protects a wage earner’s spouse and family from economic loss if the wage earner dies. If you’re single, don’t have children, and have no one depending on you for financial support, you may only need a moderate amount of life insurance or may only need enough to settle your estate.

Military Life Insurance

The Servicemembers Group Life Insurance (SGLI) program offers insurance specifically for members of the military at low rates. Service members can buy SGLI coverage in $50,000 increments, up to $400,000. The premium for $400,000 of coverage is $26 per month regardless of your age. Active duty military personnel, including reservists and National Guard members called to active duty, are automatically insured for $400,000 unless they reduce the amount or refuse the coverage in writing.

You can also purchase SGLI insurance for your spouse in $10,000 increments, up to $100,000. The amount you purchase for your spouse cannot be greater than the amount you purchased for yourself.
Dependent children are insured for $10,000 of coverage at no cost. There is also a $100,000 death gratuity for a service member who dies while on active duty.

Upon separation from the military, SGLI may be converted to Veteran’s Group Life Insurance (VGLI) or to private insurance from a list of participating companies. However, when you convert the SGLI insurance, your premium will be higher because it will reflect the cost of insurance for someone your age. If you are in good health, a better option may be to shop for a private life insurance policy rather than convert to VGLI or use one of the participating conversion companies. For more information, call the SGLI office or visit the VA website

1-800-419-1473

Deceptive and Misleading Sales Practices

Texas and many other states have rules to help prevent deceptive and misleading practices in the sale of life insurance to service members. Many service members who think they have purchased an investment or savings plan later discover they actually bought an expensive life insurance policy with a small death benefit, combined with a “side” or ”accumulation fund.” Congress has declared these “side fund” products inappropriate for most military personnel.

The following questions can help you determine if you’ve been the victim of possibly deceptive or misleading sales practices:

• Did you receive a card from someone or through the mail that offered information on your military or VA benefits, or about a military service organization, only later to receive a sales pitch for insurance, investments, savings, or retirement?
• Did someone offer you free pizza, movie tickets, or some other incentive to attend a meeting where you received a sales pitch for insurance, investments, savings, or retirement?
• Did the sales pitch focus on tax-deferred savings paying a high rate of interest?  Did someone ask you how much life insurance you needed, or ask how much you could afford to “save” each month?
• Did anyone say or imply that SGLI might not always pay or that the federal thrift savings plan isn’t a good investment?
• Did someone pressure you to sign up or rush you through an application without time to understand the details, ask questions, or read all the information?
• Did they fail or refuse to give you copies of your paperwork and information clearly describing what you just bought?

If you answered yes to any of the questions, contact your installation’s Financial Readiness Office and the staff will review your policy. If you believe you’ve been the victim of deceptive or misleading sales tactics, you can file a complaint with TDI online or by calling the Consumer Help Line

1-800-252-3439
www.tdi.state.tx.us

Buying Life Insurance

If you determine that you need more life insurance than SGLI provides, compare policies and get price quotes from several companies before buying a policy. Make sure you understand the coverages included and any exclusions or limitations. Low-cost term life insurance is also available through many veterans’ association websites. Unlike SGLI, most private insurance policies exclude coverage for acts of war.

Most life insurance policies will have a two-year “contestable period.” During this period, a company can refuse to pay benefits for suicides or for material misrepresentations, concealment, or fraud on an application.

As with any type of insurance, only buy from licensed agents and companies and consider factors other than cost, such as a company’s customer service history and its financial stability. You can learn a company’s license status and get other information about companies you’re considering by calling our Consumer Help Line or by viewing company profiles on our website.

The SCRA allows active duty service members to defer insurance premiums and payments on their individual life insurance policies while they’re on active duty and for up to two years afterward. Requests for deferment must be approved in advance by the VA. Service members will have two years after they’re released from active duty to repay the accumulated premiums and interest. Call the VA or visit its website for more information about SCRA.

Professionals in the Military

Insurance Professionals
Many reservists and National Guard members work in the insurance industry and, like all other Texas-licensed agents and brokers, are normally required to fulfill continuing education requirements. The Commissioner of Insurance, however, has waived these requirements for Texas-licensed agents and brokers who cannot fulfill their continuing education obligations because of their military service.
Returning service members are also exempt from penalties or fines for failing to renew a license that expired during the service period.

Professionals with Liability Insurance
Physicians, lawyers, and other designated professionals can request in writing that their insurance company suspend their professional liability insurance policy while they’re on active duty. SCRA requires insurance companies to suspend the coverage and to reinstate it if a service member requests reinstatement within 30 days of return.

Service members won’t be required to pay premiums during the suspension and could receive a premium reimbursement if they’ve already paid premiums for the suspension period. Service members should be aware that they will not receive any liability protection while their coverage is suspended.

Assigning ‘Power of Attorney’
Power of attorney is a special legal designation that authorizes someone to act on your behalf in financial, personal, or legal matters. If you’re deployed, you may want to consider assigning power of attorney to a spouse, family member, or trusted friend.

To assign power of attorney, you and the person you designate must sign a form in front of a notary public. Contact your judge advocate general’s office for help with a power of attorney or for a listing of recommended notaries in your area. 

For More Information or Assistance

For answers to general insurance questions or for information on filing an insurance-related complaint, call the Consumer Help Line between 8 a.m. and 5 p.m., Central time, Monday-Friday, or visit our website

1-800-252-3439
463-6515 in Austin
www.tdi.state.tx.us

For printed copies of consumer publications, call the 24-hour Publications Order Line

1-800-599-SHOP (7467)
305-7211 in Austin

Help us prevent insurance fraud. To report suspected fraud, call our toll-free Fraud Hot Line

1-888-327-8818

To report suspected arson or suspicious activity involving fires, call the State Fire Marshal’s 24-hour Arson Hot Line

1-877-4FIRE45 (434-7345)

The information in this publication is current as of the revision date. Changes in laws and agency administrative rules made after the revision date may affect the content. View current information on our website. TDI distributes this publication for educational purposes only. This publication is not an endorsement by TDI of any service, product, or company.

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