Colorado Life & Health Insurance License, Practice Exams

In the application process, the producer often acts as the 'field underwriter,' meaning they:

1. Approve and pay death claims for the insurer
2. Audit the insurer's annual financial statement and certify the adequacy of its policy reserves to the state
3. Gather information and make an initial assessment of the risk ✓
4. Set the final rate class, approve the application for issue, and calculate the reserve the insurer must hold

Why: As field underwriter the producer collects accurate information and screens obvious risks before formal underwriting.

An attorney-in-fact wishes to consent to a policy on the life of the person who appointed them. Section 10-7-707(1) permits this:

1. Only to replace cover, with no increase in the aggregate ✓
2. For any policy the attorney-in-fact considers appropriate
3. Only with the approval of a court of general jurisdiction
4. Only where the principal has lost legal capacity

Why: C.R.S. § 10-7-707(1)(e) confines the attorney-in-fact to a limited purpose: replacing one or more policies with one or more new policies where, as a result, the aggregate amount of life insurance on the person remains the same or decreases. A power of attorney cannot be used to write NEW cover on the principal's life - which would be an obvious route to manufacturing a policy the principal never wanted.

The 'cash surrender' nonforfeiture option provides that the policyowner:

1. Receives the accumulated cash value in a lump sum and ends coverage ✓
2. Buys a smaller paid-up permanent policy with the cash value
3. Keeps the full face amount as term insurance for a limited time
4. Borrows against the cash value while keeping the policy in force

Why: Cash surrender pays the net cash value in a lump sum and terminates the policy; reduced paid-up and extended term keep some insurance in force.

Suicide ceases to be a defence against payment of a Colorado life policy after:

1. The first policy year ✓
2. Two policy years
3. The contestable period expires
4. Five policy years

Why: C.R.S. § 10-7-109 makes suicide after the FIRST POLICY YEAR no defence. Note it is shorter than the two-year contestable period in § 10-7-102(1)(b) - suicide and contestability run on different clocks, and a policy in month eighteen is past the suicide period but still contestable for misrepresentation.

A licensed producer dies. Who may the commissioner grant a temporary licence to?

1. Only the surviving spouse, and only if named in the will
2. The surviving spouse, next of kin, executor or an employee of the producer ✓
3. Any producer nominated by the insurers the deceased represented
4. The personal representative, once the estate has been formally administered

Why: C.R.S. § 10-2-410(1)(a) lists the surviving spouse or next of kin, or the executor or an employee, of a licensed producer who dies. The parallel paragraph for disability, (1)(b), lists the surviving spouse or next of kin, an employee or the legal guardian.

A single policy has two owners resident in different states, one holding sixty percent. Under section 10-7-602(16) the transaction is governed by the law of:

1. The state where the policy was issued
2. The state where the insured resides
3. Either state, at the viatical settlement provider's election
4. The state where the sixty percent owner resides ✓

Why: C.R.S. § 10-7-602(16) points to the residence of the owner with the LARGEST PERCENTAGE ownership, and only where owners hold equally does it fall to a state agreed in writing by all of them. Note too that a viator is not confined to the owner of a policy on a terminally or chronically ill life except where the part says so - Colorado regulates life settlements generally, not only viatical ones in the narrow sense.

Physician services and outpatient care are covered under Medicare Part:

1. C
2. A
3. D
4. B ✓

Why: Part B is medical insurance covering physician and outpatient services; Part D covers drugs; Part C is Medicare Advantage.

A married couple's policy transfers the death benefit to the surviving spouse. For estate tax, this transfer:

1. Counts against the annual gift exclusion
2. Qualifies for the unlimited marital deduction ✓
3. Is fully taxable in the deceased's estate
4. Triggers the transfer-for-value rule

Why: Transfers to a surviving citizen spouse qualify for the unlimited marital deduction and pass free of federal estate tax.

Credit life insurance is typically written as:

1. A variable policy whose benefit rises and falls with interest rates
2. Whole life insurance with a growing cash value that the borrower may freely access at any time
3. Decreasing term equal to the outstanding loan balance, payable to the creditor ✓
4. Level term naming the borrower's family as the primary beneficiary

Why: Credit life is decreasing term tied to the loan balance; if the borrower dies, it pays the remaining debt to the creditor.

Documents the Colorado commissioner receives from the National Association of Insurance Commissioners are treated how?

1. As public records, since the division's office is a public office
2. As confidential for five years and released thereafter
3. As public records once the related examination is closed
4. As confidential, if the NAIC treats them as confidential ✓

Why: The default in C.R.S. § 10-1-103(5) is disclosure: the office is a public office and its documents are public records. The exception covers material from regulatory officials of other states, federal agencies, foreign countries or the NAIC, which keeps confidential treatment where the provider treats it as confidential; the commissioner may share it only with a recipient that agrees and has legal authority to maintain the same level of confidentiality.

The 'facility of payment' provision in a health policy allows the insurer to:

1. Refuse any claim submitted by anyone other than the insured personally named in the policy
2. Hold payment of any claim until the close of the calendar year in which the loss occurred
3. Pay a relative if there is no named beneficiary or the payee is a minor ✓
4. Pay every claim by direct deposit into a bank account the insurer selects for the insured

Why: Facility of payment lets the insurer pay a relative or other appropriate person (up to a limit) when no beneficiary is named or the beneficiary cannot give valid release.

If an insured dies during the grace period with a premium still unpaid, the insurer:

1. Pays the death benefit minus the premium that was owed ✓
2. Refunds only the prior premiums and pays no benefit
3. Denies the claim entirely because the premium was late
4. Pays double the face amount as a good-faith gesture

Why: Coverage stays in force during the grace period; a death claim is paid, with the overdue premium deducted from the proceeds.

Under section 10-20-104(3), the association's limit on PRESENT-VALUE ANNUITY BENEFITS in the aggregate, including net cash surrender and withdrawal values, is:

1. Two hundred fifty thousand dollars ✓
2. One hundred twenty-five thousand dollars
3. Two hundred thousand dollars
4. Five hundred thousand dollars

Why: C.R.S. § 10-20-104(3)(b)(I) fixes two hundred fifty thousand dollars in present-value annuity benefits, aggregated and inclusive of any net cash surrender and net cash withdrawal values. It is the annuity figure and it is not the same as any of the life or health ones - a point worth fixing in memory, because all four sit in one subsection.

Which is NOT required in the written records an HMO keeps of its complaint system under section 10-16-409(1)?

1. A description of the procedures of the complaint system
2. The name and address of each complaining enrollee ✓
3. The total number of complaints handled and the causes underlying them
4. The number, amount and disposition of malpractice claims settled during the year

Why: C.R.S. § 10-16-409(1)(b) requires the procedures, the total number of complaints with a compilation of underlying causes, and the malpractice settlement data for the HMO and its providers. Enrollee identities are not called for, and subsection (3) limits the commissioner's examination of the system by reference to the medical records protections in § 10-16-416(3).

Under the 'reduction of premium' dividend option, the dividend is:

1. Left with the insurer to accumulate interest over time
2. Applied toward the premium due at the next anniversary ✓
3. Used to buy additional paid-up whole life insurance coverage
4. Paid out to the policyowner directly in cash each year

Why: This option uses the dividend to lower the out-of-pocket premium owed at the next due date.

To be 'fully insured' for Social Security, a worker generally needs 40 quarters of coverage, whereas 'currently insured' status:

1. Requires 60 quarters of coverage and pays the full range of benefits
2. Pays no survivor benefits of any kind
3. Is limited to workers who have reached age 65
4. Requires fewer quarters and provides limited survivor benefits ✓

Why: Currently insured status (about 6 of the last 13 quarters) provides limited survivor benefits; fully insured (40 quarters) provides the full range.

A key feature of convertible term insurance is that it can be changed to a permanent policy:

1. Only if the insured becomes totally disabled first
2. Only after a new medical exam confirms insurability
3. Only during the first policy year
4. Without providing evidence of insurability ✓

Why: Convertible term can be converted to permanent coverage without evidence of insurability.

An individual health policy is 'guaranteed renewable.' This means the insurer:

1. May cancel mid-term on 30 days' written notice to the insured
2. Must hold the premium at the issue rate for the life of the contract
3. May decline renewal at any policy anniversary
4. Must renew it but may raise premiums by class ✓

Why: Guaranteed renewable guarantees renewal to a stated age while permitting class-wide premium increases (not individual ones).

Under COBRA, the maximum continuation period for an employee who loses coverage due to termination or reduced hours is generally:

1. 18 months ✓
2. 36 months
3. 12 months
4. 60 months

Why: Termination or reduced hours allows 18 months of COBRA continuation; events like divorce, death, or a child aging out allow up to 36 months.

A 'moral hazard' in underwriting refers to:

1. A tendency toward dishonesty that increases the chance of a loss ✓
2. A physical condition of property that makes a loss more likely to occur
3. The actual cause of a loss, such as a fire, accident, or illness
4. Indifference or carelessness because insurance exists to cover losses

Why: A moral hazard arises from dishonesty (e.g., misrepresentation or fraud); a morale hazard is carelessness, a physical hazard is a tangible condition, and a peril is the cause of loss.

A person's previous coverage is involuntarily terminated for a reason other than non-payment or fraud. Under section 10-18-103(5) the Medicare supplement guaranteed issue period must be at least:

1. Sixty days after the termination
2. Ninety days after the termination
3. Twelve months after the termination
4. Six months after the termination ✓

Why: C.R.S. § 10-18-103(5) sets a floor of six months, and excludes terminations for non-payment of premiums or for fraud or abuse - someone who lost cover through their own default does not get the guaranteed issue window. The subsection also deems termination of CoverColorado coordination of benefits coverage, when that plan itself ended, to be an involuntary termination.

A salary continuation plan funded with life or disability insurance is designed to:

1. Pay the business's monthly rent, utilities, and supplier invoices while the owner is away on a long vacation
2. Provide every employee a guaranteed annual cost-of-living raise
3. Continue income to a key employee (or their family) during disability or after death ✓
4. Refund payroll taxes the employer paid during a profitable year

Why: A salary continuation plan provides continued income to a selected employee or their survivors upon disability, retirement, or death.

Which does section 10-19-107(1) permit in a long-term care insurance policy?

1. Cancellation on the ground of the insured's deteriorating mental health
2. A new waiting period for an increase in benefits the insured voluntarily selects ✓
3. Coverage for skilled nursing care only
4. An exclusion for dementia diseases and related disabilities

Why: C.R.S. § 10-19-107(1)(b) bars a new waiting period where existing coverage is converted or replaced within the same company, EXCEPT with respect to an increase in benefits the insured or group policyholder voluntarily selects. The other three are all prohibited outright: cancellation for age or deteriorating mental or physical health, skilled-care-only cover, and any exclusion for dementia.

A carrier wishes to limit when people may enrol in its individual health benefit plans. Section 10-16-105(2) allows it to:

1. Restrict enrollment to a single annual period only
2. Refuse enrollment outside the plan year in all cases
3. Restrict enrollment to open or special enrollment periods ✓
4. Set its own enrollment periods without reference to any rule

Why: C.R.S. § 10-16-105(2) permits the restriction and then imposes a duty alongside it: the carrier SHALL establish special enrollment periods for triggering or qualifying events consistent with § 10-16-105.7 and the commissioner's rules. Guaranteed issuance is about who may be refused, not about when they may apply.

An annuitant has a $30,000 basis and a $120,000 expected return. Of each $6,000 payment, the taxable amount is:

1. $4,500 ✓
2. $1,500
3. $6,000
4. $3,000

Why: Exclusion ratio = 30,000/120,000 = 25%; $1,500 excluded, $4,500 taxable.

In an equity-indexed annuity, the 'cap rate' is the:

1. Maximum interest rate credited even if the index rises more ✓
2. Share of the index gain that the insurer credits to the contract
3. Guaranteed minimum rate credited when the index loses value in a year
4. Fee deducted on surrender in year one

Why: The cap is the ceiling on credited interest; the participation rate sets the share of the gain and the floor sets the minimum.

Concurrent utilization review in a managed-care plan assesses:

1. Whether the group's premium rate should be adjusted at renewal
2. The commission owed to the producer on each enrolled member
3. Whether continued care is necessary while a patient is being treated ✓
4. Which providers will accept a capitation payment before joining the network

Why: Concurrent review evaluates the necessity and appropriateness of care during treatment (e.g., an ongoing hospital stay); prospective review occurs before, retrospective after.

A managed-care plan requires approval before a planned, non-emergency hospital admission. This is:

1. Preadmission certification ✓
2. Coordination of benefits
3. A capitation arrangement
4. A second surgical opinion

Why: Preadmission (precertification) requires the plan's prior approval of planned admissions to be covered.

Does the HIV testing section reach a health maintenance organization regulated under article 16?

1. No; the section applies only to life insurers
2. No; HMOs are regulated exclusively under article 16
3. Yes; HMOs are deemed engaged in the business of insurance ✓
4. Yes, but only in respect of its indemnity-style products

Why: C.R.S. § 10-3-1104.5(2)(f) defines "person" to include medical service and hospital service plans regulated under parts 1 and 3 of article 16 and health maintenance organizations regulated under parts 1 and 4 of article 16, and deems them engaged in the business of insurance for the purposes of the section. Insurance agents and brokers are excluded from the definition.

The guaranteed insurability rider allows the insured to:

1. Exchange the life policy for an immediate income annuity at any time without a surrender charge
2. Elect the cash dividend option each year
3. Buy more coverage at set option dates without proving insurability ✓
4. Stop premium payments during a period of total disability

Why: It guarantees the right to purchase more coverage at set option dates without re-proving insurability.

Preauthorization (precertification) is a managed-care cost control that requires:

1. The insured to pay double coinsurance on all elective surgeries
2. An automatic second opinion from a state-appointed physician
3. Providers to accept a fixed monthly payment per enrolled member
4. Approval before certain services or hospitalizations ✓

Why: Preauthorization requires the plan's approval before specified non-emergency procedures or admissions for them to be covered.

An insurance contract is 'aleatory,' meaning that:

1. The premiums paid in and the benefits paid out must always come out to equal dollar values
2. The dollar amounts exchanged by the parties may be unequal and depend on chance ✓
3. A court must approve the contract before it takes effect
4. Only the insured gives a legally enforceable promise

Why: In an aleatory contract the values exchanged are unequal and contingent on an uncertain event (a small premium may yield a large benefit, or none).

An alien insurer is one that is:

1. Incorporated in this state
2. Incorporated outside the United States ✓
3. Incorporated in another U.S. state
4. Not licensed in any state

Why: Alien = incorporated in another country; domestic = this state; foreign = another U.S. state.

A cash refund annuity guarantees that, if the annuitant dies early, the beneficiary receives:

1. Double the original premium as an accidental-death style bonus payment
2. Any premium not yet paid out, in a lump sum ✓
3. Nothing, because all annuity payments stop at the annuitant's death
4. Continued lifetime payments for the rest of the beneficiary's own life

Why: A cash refund pays the beneficiary, in a lump sum, the difference between premiums paid and payments already received; an installment refund pays it out in continued installments.

Under a presumptive disability provision, the insured is presumed totally disabled (and paid full benefits) upon:

1. Any short illness expected to resolve within a single week
2. Total loss of sight, hearing, speech, or two limbs ✓
3. Reaching the policy's stated benefit-period maximum age
4. Voluntary early retirement from a physically demanding job

Why: Presumptive disability pays full benefits for specified losses (sight, hearing, speech, or two limbs) even if the insured is able to work.

An employee's dependent child loses coverage by aging out of the plan. The maximum COBRA continuation for that child is:

1. 36 months ✓
2. 18 months
3. 12 months
4. 6 months

Why: A dependent aging out is a qualifying event allowing up to 36 months of COBRA continuation.

Under IRC Section 1035, a tax-free exchange is permitted FROM a life insurance policy TO:

1. Only a bank certificate of deposit held at an insured institution
2. A mutual fund account invested in the same insurer's stock
3. An annuity contract ✓
4. Nothing — life policies can never be exchanged tax-free at all

Why: 1035 allows tax-free exchanges from life to life, life to annuity, and life/annuity to LTC; an annuity may NOT be exchanged into life insurance tax-free.

Life insurance used to fund a 'one-way' buy-sell agreement for a sole proprietorship typically lets:

1. Creditors seize the business ahead of the owner's heirs
2. A key employee buy the business from the owner's estate at death ✓
3. The state liquidate the business and distribute the proceeds
4. The owner's spouse automatically take over daily management duties

Why: In a one-way (unilateral) buy-sell, a chosen successor (often a key employee) uses insurance proceeds to purchase the business from the deceased owner's estate.

Paragraph (a)(VII) reaches a misrepresentation made for the purpose of:

1. Increasing the face amount of an existing policy
2. Adding a supplementary benefit rider to an existing contract
3. Reinstating a policy that has already lapsed
4. Effecting a pledge, assignment or loan against a policy ✓

Why: C.R.S. § 10-3-1104(1)(a)(VII) covers misrepresentation aimed at effecting a pledge or assignment of, or a loan against, any insurance policy. Together with (a)(VI) it protects the policy a client already owns from two directions: from being surrendered on bad information, and from being encumbered on it.

Which type of life insurance provides lifelong coverage with a level premium and a guaranteed cash value?

1. Annually renewable term
2. Whole (ordinary) life ✓
3. Level term to age 65
4. Credit life

Why: Whole life is permanent coverage with a level premium and a guaranteed, tax-deferred cash value. Term provides only temporary coverage with no cash value.

The provision fulfilling section 10-3-205 is not required in which policies?

1. Nonparticipating policies ✓
2. Term policies of twenty years or less
3. Single premium policies
4. Policies issued to insureds over 65

Why: C.R.S. § 10-7-102(1)(e) excuses nonparticipating policies from the § 10-3-205 provision - a sensible carve-out, since a policy that pays no dividends has nothing for such a provision to govern. Do not confuse it with the separate carve-out in paragraph (f), which excuses term insurance of twenty years or less from the older nonforfeiture requirement in § 10-7-107.

Sharing or paying a commission to an unlicensed individual is generally:

1. Required by most state laws
2. Permitted for referrals only
3. Prohibited ✓
4. Allowed if the amount is small

Why: Commissions may be paid only to properly licensed persons; paying an unlicensed individual is prohibited (limited nominal referral fees aside).

Under the uniform individual health provisions, the grace period for a policy with monthly premiums is:

1. 60 days after the calendar year ends
2. 10 days ✓
3. 24 hours from the due date
4. 6 months following any missed payment

Why: Health grace periods are 7 days for weekly premium, 10 days for monthly, and 31 days for all other modes.

A group sickness and accident policy is issued to a body eligible to hold a group LIFE policy. Under section 10-16-214(1) it must cover at date of issue at least:

1. Ten individuals
2. Twenty-five individuals
3. Two individuals ✓
4. One individual

Why: C.R.S. § 10-16-214(1)(c) borrows the eligibility rules of group life insurance and then imposes its own floor of two or more individuals at date of issue. It is the lowest threshold in the section, and it exists so that a group sickness and accident policy can follow wherever group life may already lawfully go.

A reciprocal insurer is:

1. An unincorporated group of members who insure each other through an attorney-in-fact ✓
2. A federal chartering agency that licenses insurers under the McCarran-Ferguson Act
3. A stock company whose shareholders elect the board and receive taxable dividends
4. A fraternal benefit society organized in lodges that sells only to its own members

Why: A reciprocal is an unincorporated association whose subscribers exchange insurance among themselves, managed by an attorney-in-fact.

A person who reports a settlement or judgment involving a fraudulent insurance act under section 10-1-128(4) receives:

1. A share of any civil penalty ultimately recovered
2. Anonymity guaranteed by the division of insurance
3. Immunity from any cause of action for reporting it ✓
4. A statutory reward in an amount the commissioner sets

Why: Each of paragraphs (a), (b) and (c) of C.R.S. § 10-1-128(4) ends by providing that no cause of action shall arise for providing the information: paragraph (a) protects any insurance company or individual, and paragraphs (b) and (c) protect any person.

A carrier grants a producer underwriting authority to issue long-term care policies using the carrier's guidelines. Under section 10-19-113.3(3) issuing on the basis of medical or health status is:

1. Permitted where the producer is separately trained
2. Permitted where the carrier audits the decisions
3. Prohibited ✓
4. Permitted for policies below a stated benefit amount

Why: C.R.S. § 10-19-113.3(3) bars field issuing based on medical or health status, and defines field issued as issuance by a producer or third-party administrator under underwriting authority granted by a carrier using the insurer's guidelines. The concern is the incentive: the person paid for the sale should not be the person deciding whether the applicant's health passes.

Key person disability insurance provides benefits to:

1. The business, to offset the loss when a key employee is disabled ✓
2. Every employee of the firm equally, regardless of their role
3. A lender, to pay off the company's outstanding commercial loans
4. The disabled employee's family, to replace their lost personal income

Why: Key person disability is owned by and paid to the business to cover losses and the cost of replacing an essential employee who becomes disabled.

Which is NOT part of the care obligation stated in Regulation 4-1-11-5?

1. Knowing the consumer's financial situation, insurance needs and financial objectives
2. Understanding the available options after reasonable inquiry
3. Monitoring the annuity's performance after the sale ✓
4. Communicating the basis or bases of the recommendation

Why: Regulation 4-1-11-5.A.1.a lists four duties: know the consumer's situation, needs and objectives; understand the available recommendation options after reasonable inquiry; have a reasonable basis to believe the recommended option effectively addresses those needs OVER THE LIFE OF THE PRODUCT; and communicate the basis of the recommendation. Subsection i. then says expressly that this creates no ongoing monitoring obligation, though one may be owed separately under a consulting, advisory or financial planning agreement.

An insurer markets a product under a name suggesting it is a retirement savings account rather than an annuity contract. Paragraph (a)(V):

1. Permits it as ordinary marketing language
2. Permits it if the contract itself is accurate
3. Requires the commissioner's prior approval of the name
4. Prohibits a name misrepresenting the true nature ✓

Why: C.R.S. § 10-3-1104(1)(a)(V) makes it an unfair practice to use any name or title of any insurance policy or class of insurance policies misrepresenting its true nature. The paragraph provides no exception for an accurate contract or for prior approval of the name.

Under the 'paid-up additions' dividend option, dividends are used to:

1. Pay the policyowner the dividend directly in cash each year
2. Reduce the premium due on the next policy anniversary date
3. Purchase one-year term insurance equal to the cash value
4. Buy small amounts of additional paid-up whole life coverage ✓

Why: Paid-up additions use dividends to buy single-premium whole life, increasing both death benefit and cash value with no new underwriting.

A policy ends cover at a stated age, and the insurer accepts a premium for a period running past that date. Under section 10-16-211 the coverage:

1. Ends on the stated date, the premium being refunded
2. Continues to the end of the period for which premium was accepted ✓
3. Continues for a further full policy year
4. Ends on the stated date, the premium being retained as earned

Why: C.R.S. § 10-16-211 keeps the cover alive, subject to any right of cancellation, for as long as the accepted premium runs. The second limb handles the different case of a MISSTATED age: where the true age means cover would never have attached or would already have ceased, the insurer's liability is limited to refunding, on request, the premiums for the period not covered.

A company wants key person cover on an employee. Under section 10-7-704(1) it must obtain the employee's written consent before purchase, and if the employee refuses the company:

1. May lawfully terminate their employment
2. May purchase the cover with the commissioner's approval
3. May not retaliate or take adverse action against them ✓
4. May purchase the cover for a reduced face amount

Why: C.R.S. § 10-7-704(1)(h) requires written consent before purchase and forbids the business entity, affiliate or subsidiary from retaliating or taking adverse action against a key employee or key person who withholds it. The same protection appears in paragraph (g) for plan participants. Consent is worth little if refusing it costs someone their job, so the statute protects the refusal as well as requiring the consent.

When a child is covered under both parents' health plans, the primary plan is usually determined by the:

1. Birthday rule, using the parent whose birthday is earlier in the year ✓
2. Alphabetical order of the two parents' last names on their policies
3. Age of the child at the time the particular medical expense was incurred
4. Plan that happens to charge the lower of the two monthly premiums

Why: The birthday rule makes primary the plan of the parent whose birthday falls earlier in the calendar year.

Under the Uniform Simultaneous Death Act, if the insured and the primary beneficiary die together and the order of death is unknown, it is presumed that:

1. Both parties forfeit the proceeds back to the issuing insurance company
2. The beneficiary survived the insured and the proceeds go through that person's estate
3. The proceeds are split equally between both estates by the probate court
4. The insured survived the beneficiary ✓

Why: The Act presumes the insured outlived the beneficiary, so proceeds pass to the contingent beneficiary or the insured's estate, not the deceased beneficiary's estate.

The period during which an annuity owner pays premiums and the contract grows is the:

1. Elimination period
2. Accumulation period ✓
3. Probationary period
4. Annuitization period

Why: During the accumulation period money is paid in and grows tax-deferred; the annuitization (payout) period is when income payments are made.

The fraud warning requirement does not apply to:

1. Group life and group health contracts generally
2. Policies sold through the nonadmitted surplus lines market
3. Applications taken and transmitted electronically
4. Reinsurance contracts, agreements and claims transactions ✓

Why: C.R.S. § 10-1-128(6)(b) provides that the fraud warning requirement in subsection (6) does not apply to reinsurance contracts, reinsurance agreements, or reinsurance claims transactions.

An insured has a terminal illness and medical aid-in-dying is available to them under article 48 of title 25. The insurer:

1. May exclude death occurring by that means
2. May reduce the benefits otherwise payable proportionately
3. Shall not deny or alter benefits on that basis ✓
4. May require the insured to purchase a rider

Why: C.R.S. § 10-7-103(3) forbids denying or altering benefits otherwise available to an individual with a terminal disease based on the AVAILABILITY of medical aid-in-dying under article 48 of title 25. Note the reach: it is the availability of the option that cannot be used against the insured, whether or not it is ever taken up.

A disability policy has a 30-day probationary period for sickness. An insured who becomes ill on day 20 of coverage:

1. Receives only accident benefits for it
2. Has no benefit for that sickness ✓
3. Is fully covered like any other claim
4. Must restart the entire policy

Why: The probationary period excludes sicknesses that begin during the initial waiting span (here, the first 30 days); accidents are usually covered immediately.

To reinstate a lapsed policy, an insured must typically provide evidence of insurability and:

1. Wait five years from the lapse date
2. Pay only the single current premium
3. Purchase an additional rider
4. Pay all back premiums with interest ✓

Why: Reinstatement requires proof of insurability plus payment of overdue premiums with interest (and any loan), within the allowed window.

Which permanent policy features flexible premiums and an adjustable death benefit?

1. Level term
2. Universal life ✓
3. Whole life
4. Single-premium whole life

Why: Universal life allows the owner to vary premium payments and adjust the death benefit (subject to underwriting); cash value earns a declared interest rate.

An insurer runs a bonus scheme rewarding producers who sell a set number of one particular annuity within a quarter. Under Regulation 4-1-11-5 its supervision system must:

1. Disclose the scheme to affected consumers
2. Identify and eliminate the scheme ✓
3. Cap the bonus at a reasonable percentage of premium
4. Report the scheme annually to the commissioner

Why: Regulation 4-1-11-5.C.2 requires procedures to identify and ELIMINATE any sales contests, sales quotas, bonuses and non-cash compensation based on the sale of specific annuities within a limited period of time. Disclosure is not the remedy here, which is the contrast worth holding: material conflicts under 5.A.3 may be managed and disclosed, but a time-limited product-specific sales incentive has to go.

An agent binding an insurer to a risk the company did not intend to cover is an example of which type of authority?

1. Express authority granted explicitly in the agency contract
2. Fiduciary authority arising from handling client premium funds
3. Apparent authority ✓
4. Implied authority needed to carry out expressly granted duties

Why: Apparent authority is the appearance of authority a reasonable client perceives; express and implied are actually granted, so the distractors describe legitimate authority.

Industrial (home service / 'debit') life insurance is characterized by:

1. Mandatory medical exams for every single applicant
2. Small face amounts and frequent premium collection ✓
3. Coverage available only through a group employer plan
4. Large face amounts with cash value invested in the insurer's separate investment accounts

Why: Industrial (debit) policies carry small face amounts with premiums historically collected weekly or monthly by an agent at the insured's home.

A policy loan taken against a life policy's cash value:

1. Is treated as taxable income in the year the loan is taken
2. Must be repaid in full within thirty days or it lapses
3. Requires the owner to submit new evidence of insurability
4. Reduces the death benefit by any unpaid loan and interest ✓

Why: Unpaid loan balance and interest are subtracted from the death benefit; loans are not taxable while the policy stays in force.

A family maintenance policy combines whole life with level term to:

1. Provide temporary coverage only, expiring with no cash value at the end of a stated 10- or 20-year term
2. Invest part of each premium in the mutual fund subaccounts the policyowner selects and may switch at will
3. Decrease the death benefit gradually as the children grow up and the family's income need falls away
4. Pay an income for a set period beginning at the insured's death, then the face amount ✓

Why: Family maintenance adds level term to whole life; if the insured dies during the term, it pays income for a stated period from the date of death, then the face amount.

A producer tells a client false negative information about a competing insurer to win the sale. This is:

1. Twisting
2. Rebating
3. Defamation ✓
4. Coercion

Why: Making false, maligning statements about another insurer is defamation, an unfair trade practice.

An employee receives $250,000 of employer-paid group term life. The amount subject to imputed taxable income is:

1. $200,000 ✓
2. $250,000
3. $50,000
4. $100,000

Why: The first $50,000 is tax-free; the cost of the remaining $200,000 is imputed income.

An unlicensed bank teller is asked about an annuity by a customer. The teller may:

1. Explain the product but not take an application
2. Sell it under a licensed colleague's supervision
3. Direct the customer to a licensed person ✓
4. Complete the sale if the amount is below a threshold

Why: C.R.S. § 10-2-607 provides that unlicensed employees of financial institutions shall not sell insurance or annuities, but may direct customers to licensed persons; section 10-2-601(2)(b) states the same rule. Directing the customer to a licensed person is the only activity the statute expressly permits the unlicensed employee.

Under the uniform 'proof of loss' provision, written proof must generally be furnished within:

1. 30 days before the loss is expected to occur
2. 24 hours of the insured first noticing any symptom
3. 90 days after the loss (or as soon as reasonably possible) ✓
4. 3 years from the date the policy was originally issued

Why: Proof of loss is due within 90 days of the loss, or as soon as reasonably possible, but not later than one year except in cases of legal incapacity.

A producer presents sales material electronically during a replacement sale. Under Regulation 4-1-4-5 the printed form must reach the owner:

1. At the time the application is completed, without exception
2. No later than at the time of policy or contract delivery ✓
3. Only if the owner asks for a printed copy
4. Within thirty days of the policy's effective date

Why: Regulation 4-1-4-5.D requires the producer to leave the original or a copy of all sales material with the applicant when the application is completed, and makes one accommodation for electronic presentation: printed form no later than at policy or contract delivery. The material still has to arrive on paper - the concession is to timing, not to substance.

For group term life insurance, the cost of employer-provided coverage exceeding $50,000 is:

1. Taxed only when the employee eventually leaves the company
2. Exempt from tax because all group life is a tax-free benefit
3. Imputed as taxable income to the covered employee ✓
4. Fully deductible by the employee on their personal return

Why: Employees are taxed (imputed income, via IRS Table I) on the cost of employer-paid group term coverage above $50,000.

An applicant placed in a 'substandard' (rated) risk classification:

1. Pays a higher premium because of greater-than-average mortality risk ✓
2. Receives the lowest premium available because of excellent health
3. Must purchase only group coverage offered through an employer
4. Is always declined and cannot obtain coverage from any insurer

Why: Substandard (rated) applicants present above-average risk and pay higher premiums; preferred risks pay the least, declined applicants are refused.

An insured needs help with bathing and dressing but is otherwise alert. The level of care required is:

1. Skilled nursing care
2. Acute hospital care
3. Custodial care ✓
4. Intensive care

Why: Assistance with ADLs that does not require medical skill is custodial care; skilled care requires licensed medical professionals.

Credit life insurance is typically structured so that:

1. The face amount increases over the life of the underlying loan
2. Coverage continues at the same level long after the loan is repaid
3. The borrower's family receives the full original loan amount in cash
4. It is decreasing term with the creditor named as the beneficiary ✓

Why: Credit life is usually decreasing term equal to the outstanding debt, with the lender as beneficiary; it cannot exceed the loan balance.

In a disability income policy, the 'benefit period' is:

1. The waiting time after a disability before any benefit is payable
2. The maximum length of time benefits will be paid for a disability ✓
3. The number of days the insured has to file written proof of loss
4. The period after issue during which sickness claims are excluded

Why: The benefit period is the maximum duration benefits are paid (e.g., 2 years, 5 years, to age 65); the elimination period is the waiting time before they start.

To enroll in a Medicare Advantage (Part C) plan, a beneficiary must first have:

1. Only a Medicare Part D drug plan
2. Both Medicare Part A and Part B ✓
3. Full Medicaid eligibility in their state
4. An existing Medicare Supplement policy

Why: Medicare Advantage requires the beneficiary to be enrolled in both Part A and Part B; the MA plan then delivers those benefits (usually with Part D).