Colorado Life & Health Insurance State Law Supplement – 2024
Practice Exam | Life Producer Licensing Study Guide | Real Exam
Questions & Answers | 100% Exam-Focused & Up-to-Date
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds
annually to his spouse, but that the principal will be paid to their children when they reach a certain age.
Which settlement option should the policyowner choose?
Interest only option With the interest-only option, the insurance company retains the policy proceeds and pays
interest on the proceeds to the recipient (beneficiary) at regular intervals.
Which two terms are associated directly with the premium?
Level or flexible A level premium is one in which the premium payment never changes. A flexible premium is
found in Universal life policies where the insured changes their premium payment.
The main difference between immediate and deferred annuities is:
When the income payments begin. The main difference between immediate and deferred annuities is when the
income payments begin. Immediate annuities will begin payments within the first year, while deferred annuities
will not begin payments until sometime after the first year.
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is:
A Modified Endowment Contract. Any cash value life insurance policy that develops cash value faster than a
seven-pay whole life contract is called a Modified Endowment Contract. It loses the benefits of a standard life
contract.
Why should the producer personally deliver the policy when the first premium has already been paid?
To help the insured understand all aspects of the contract. It is the producer's responsibility to make sure that the
policy is understood by the insured and all of their questions are satisfied, and the delivery receipt is signed.
Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial
accelerated death benefit had been paid while the insured was still alive?
Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income
from the accelerated benefit. If an insured withdraws a portion of the death benefit by the use of this rider, the
benefit payable at death will be reduced by that amount, plus the amount of earnings lost by the insurance
company in interest income.
Which nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up, The reduced paid-up nonforfeiture option would provide protection until the insured reaches
100, but the face amount is reduced to what the cash would buy.
Which of the following allows the insurer to relieve a minor insured from premium payments if the
minor's parents have died or become disabled?
Payor Benefit, If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the
insurer will waive the premiums until the minor reaches a certain age, such as 21.
,What is the number of credits required for fully insured status for Social Security disability benefits?
40, The term "fully insured" refers to someone who has earned 40 quarters of coverage (10 years of work times
4 maximum annual credits).
The term "illustration" in a life insurance policy refers to:
A presentation of nonguaranteed elements of a policy. The term "illustration" means a presentation or depiction
that includes nonguaranteed elements of a policy of individual or group life insurance over a period of years.
An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is
killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated
on the application. What will the company do?
Pay a reduced death benefit, The incontestability clause prevents an insurer from denying a claim due to
statements in an application after the policy has been in force for 2 years. However, it does not apply to
statements relating to age, sex and identity.
The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change
the beneficiary before the insured's death, the proceeds of the policy will go to:
The insured's estate. In the absence of a viable beneficiary, proceeds will be paid to the estate of the insured.
In a survivorship life policy, when does the insurer pay the death benefit?
Upon the last death, Survivorship life pays on the last death rather than upon the first death.
Which of the following terms means a result of calculation based on the average number of months the
insured is projected to live due to medical history and mortality factors?
Life expectancy, Life Expectancy is an important concept in life settlement contracts. It refers to a calculation
based on the average number of months the insured is projected to live due to medical history and mortality
factors (an arithmetic mean).
Children's riders attached to whole life policies are usually issued as what type of insurance?
Term, Children's term riders provide term insurance with coverage expiring when the minor reaches a certain
age.
What is consideration in a policy?
Consideration is something of value that is transferred between the two parties to form a legal contract.
Which of the following is correct concerning the taxation of premiums in a key-person life insurance
policy?
Premiums are not tax deductible as a business expense. The business cannot take a tax deduction for the
expense of the premium. However, if the key employee dies, the benefits paid to the business are usually
received tax free.
A domestic insurer issuing variable contracts must establish one or more:
,Separate accounts. Any domestic insurer issuing variable contracts must establish one or more separate
accounts. The insurer must maintain in each separate account assets with a value at least equal to the reserves
and other contract liabilities connected to the account.
What is the other term for the cash payment settlement option?
Lump sum, Upon the death of the insured, the contract is designed to pay the proceeds in cash, called a lump
sum.
Which of the following riders would NOT cause the Death Benefit to increase?
Payor Benefit Rider, Payor Benefit Rider does not increase the Death Benefit; it only pays the premium if the
payor is disabled or dies. With Guaranteed Insurability Rider, the policyowner can increase DB at specified ages
or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in
Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.
Your client wants both protection and savings from the insurance, and is willing to pay premiums until
retirement at age 65. What would be the right policy for this client?
Limited pay whole life, Premium payments will cease at her age 65, but coverage will continue to her death or
age 100.
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to:
Purchase a single premium policy for a reduced face amount. When a whole life policy lapses or is surrendered
prior to maturity, the cash value can be used by the insurer as a single premium to purchase a completely paid
up permanent policy that has a reduced face amount from that of the former policy.
The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend
check each year. She has decided that she would rather use the dividends to help pay for her next
premium. What option would allow her to do this?
Reduction of premium, The Reduction of Premium option allows the policyholder to apply policy dividends
toward the next year's premium. The dividend is subtracted from the premium amount, yielding the new
premium due for the next year.
The regulations regarding replacement apply to which of the following?
Renewable term, Replacement rules apply to all life insurance policies except group life policies, group
annuities, credit life or nonconvertible term which will expire in 5 years or less and cannot be renewed.
Purchasing additional coverage under the GIR is not a replacement of coverage, simply an addition of coverage.
Which of the following terms describes making false statements about the financial condition of any
insurer that are intended to injure any person engaged in the business of insurance?
Defamation, Defamation is making statements that are false as to the financial condition of any insurer and
which are calculated to injure any person engaged in the business of insurance.
In group life policies in this state, when may the insurer use suicide as a cause of death as a defense
against paying a claim?
If the suicide occurs during the first year of coverage. The suicide of a policyholder after the first policy year of
any life insurance policy issued by any life insurance company in this state will not be a defense against the
, payment of a life insurance policy, whether the suicide was voluntary or involuntary, and whether the
policyholder was sane or insane.
In order to get a nonresident license in this state, a producer must:
Apply and pay a fee to a nonresident state that reciprocates. A producer may apply for a nonresident license by
showing that they are in good standing as a producer in their home state and by paying a fee, if the two states
reciprocate.
What is the maximum civil penalty per violation if an unauthorized entity violates the Commissioner's
cease and desist order?
$25,000, The Commissioner may take the following actions against an unauthorized insurer that violated a
cease and desist order: impose a civil penalty of $25,000 per violation, or direct the entity to make complete
restitution to all parties affected by the violation, or both.
How often must the Commissioner examine all insurers to guard against insurance company insolvency?
At least once every 5 years, The Commissioner may conduct an examination or investigation of any company or
person as often as deemed appropriate, but at least once every 5 years.
Of the required 50 hours of prelicensing education, what is the minimum number of hours an applicant
must complete on the subject of ethics?
3 hours, Of the 50 hours, at least 3 hours will pertain specifically to insurance industry ethics.
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available
for the payment of losses or claims. The company is guilty of:
Misrepresentation. Issuing or circulating any sales material that is false or misleading would be considered
misrepresentation and is illegal.
Within how many days are insurers required to notify the Commissioner that a producer's employment
has been terminated?
30 days, The Commissioner must be notified within 30 days following the effective date of the termination.
Who has the right to assign incidents of ownership under a group life insurance policy?
The individual insured, A person insured under a group life insurance policy has the right to assign all or any
part of incidents of ownership under such policy, including, but not limited to, the privilege to have issued to the
insured an individual life insurance policy and the right to name a beneficiary.
Believing a producer has violated provisions of the Insurance Code, the Commissioner will schedule a
hearing:
To allow the producer to show why penalties should not be assessed. Once the Commissioner has reasonable
grounds to believe that a person has violated insurance laws, the Commissioner must conduct a hearing to allow
the person to defend themselves. Upon failure of the person to redeem their actions, the Commissioner may
impose fines or suspend or revoke the person's license.
A purchaser of life insurance policy has the right to return the policy for a full refund of the premium if
done within:
Practice Exam | Life Producer Licensing Study Guide | Real Exam
Questions & Answers | 100% Exam-Focused & Up-to-Date
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds
annually to his spouse, but that the principal will be paid to their children when they reach a certain age.
Which settlement option should the policyowner choose?
Interest only option With the interest-only option, the insurance company retains the policy proceeds and pays
interest on the proceeds to the recipient (beneficiary) at regular intervals.
Which two terms are associated directly with the premium?
Level or flexible A level premium is one in which the premium payment never changes. A flexible premium is
found in Universal life policies where the insured changes their premium payment.
The main difference between immediate and deferred annuities is:
When the income payments begin. The main difference between immediate and deferred annuities is when the
income payments begin. Immediate annuities will begin payments within the first year, while deferred annuities
will not begin payments until sometime after the first year.
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is:
A Modified Endowment Contract. Any cash value life insurance policy that develops cash value faster than a
seven-pay whole life contract is called a Modified Endowment Contract. It loses the benefits of a standard life
contract.
Why should the producer personally deliver the policy when the first premium has already been paid?
To help the insured understand all aspects of the contract. It is the producer's responsibility to make sure that the
policy is understood by the insured and all of their questions are satisfied, and the delivery receipt is signed.
Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial
accelerated death benefit had been paid while the insured was still alive?
Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income
from the accelerated benefit. If an insured withdraws a portion of the death benefit by the use of this rider, the
benefit payable at death will be reduced by that amount, plus the amount of earnings lost by the insurance
company in interest income.
Which nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up, The reduced paid-up nonforfeiture option would provide protection until the insured reaches
100, but the face amount is reduced to what the cash would buy.
Which of the following allows the insurer to relieve a minor insured from premium payments if the
minor's parents have died or become disabled?
Payor Benefit, If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the
insurer will waive the premiums until the minor reaches a certain age, such as 21.
,What is the number of credits required for fully insured status for Social Security disability benefits?
40, The term "fully insured" refers to someone who has earned 40 quarters of coverage (10 years of work times
4 maximum annual credits).
The term "illustration" in a life insurance policy refers to:
A presentation of nonguaranteed elements of a policy. The term "illustration" means a presentation or depiction
that includes nonguaranteed elements of a policy of individual or group life insurance over a period of years.
An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is
killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated
on the application. What will the company do?
Pay a reduced death benefit, The incontestability clause prevents an insurer from denying a claim due to
statements in an application after the policy has been in force for 2 years. However, it does not apply to
statements relating to age, sex and identity.
The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change
the beneficiary before the insured's death, the proceeds of the policy will go to:
The insured's estate. In the absence of a viable beneficiary, proceeds will be paid to the estate of the insured.
In a survivorship life policy, when does the insurer pay the death benefit?
Upon the last death, Survivorship life pays on the last death rather than upon the first death.
Which of the following terms means a result of calculation based on the average number of months the
insured is projected to live due to medical history and mortality factors?
Life expectancy, Life Expectancy is an important concept in life settlement contracts. It refers to a calculation
based on the average number of months the insured is projected to live due to medical history and mortality
factors (an arithmetic mean).
Children's riders attached to whole life policies are usually issued as what type of insurance?
Term, Children's term riders provide term insurance with coverage expiring when the minor reaches a certain
age.
What is consideration in a policy?
Consideration is something of value that is transferred between the two parties to form a legal contract.
Which of the following is correct concerning the taxation of premiums in a key-person life insurance
policy?
Premiums are not tax deductible as a business expense. The business cannot take a tax deduction for the
expense of the premium. However, if the key employee dies, the benefits paid to the business are usually
received tax free.
A domestic insurer issuing variable contracts must establish one or more:
,Separate accounts. Any domestic insurer issuing variable contracts must establish one or more separate
accounts. The insurer must maintain in each separate account assets with a value at least equal to the reserves
and other contract liabilities connected to the account.
What is the other term for the cash payment settlement option?
Lump sum, Upon the death of the insured, the contract is designed to pay the proceeds in cash, called a lump
sum.
Which of the following riders would NOT cause the Death Benefit to increase?
Payor Benefit Rider, Payor Benefit Rider does not increase the Death Benefit; it only pays the premium if the
payor is disabled or dies. With Guaranteed Insurability Rider, the policyowner can increase DB at specified ages
or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in
Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.
Your client wants both protection and savings from the insurance, and is willing to pay premiums until
retirement at age 65. What would be the right policy for this client?
Limited pay whole life, Premium payments will cease at her age 65, but coverage will continue to her death or
age 100.
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to:
Purchase a single premium policy for a reduced face amount. When a whole life policy lapses or is surrendered
prior to maturity, the cash value can be used by the insurer as a single premium to purchase a completely paid
up permanent policy that has a reduced face amount from that of the former policy.
The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend
check each year. She has decided that she would rather use the dividends to help pay for her next
premium. What option would allow her to do this?
Reduction of premium, The Reduction of Premium option allows the policyholder to apply policy dividends
toward the next year's premium. The dividend is subtracted from the premium amount, yielding the new
premium due for the next year.
The regulations regarding replacement apply to which of the following?
Renewable term, Replacement rules apply to all life insurance policies except group life policies, group
annuities, credit life or nonconvertible term which will expire in 5 years or less and cannot be renewed.
Purchasing additional coverage under the GIR is not a replacement of coverage, simply an addition of coverage.
Which of the following terms describes making false statements about the financial condition of any
insurer that are intended to injure any person engaged in the business of insurance?
Defamation, Defamation is making statements that are false as to the financial condition of any insurer and
which are calculated to injure any person engaged in the business of insurance.
In group life policies in this state, when may the insurer use suicide as a cause of death as a defense
against paying a claim?
If the suicide occurs during the first year of coverage. The suicide of a policyholder after the first policy year of
any life insurance policy issued by any life insurance company in this state will not be a defense against the
, payment of a life insurance policy, whether the suicide was voluntary or involuntary, and whether the
policyholder was sane or insane.
In order to get a nonresident license in this state, a producer must:
Apply and pay a fee to a nonresident state that reciprocates. A producer may apply for a nonresident license by
showing that they are in good standing as a producer in their home state and by paying a fee, if the two states
reciprocate.
What is the maximum civil penalty per violation if an unauthorized entity violates the Commissioner's
cease and desist order?
$25,000, The Commissioner may take the following actions against an unauthorized insurer that violated a
cease and desist order: impose a civil penalty of $25,000 per violation, or direct the entity to make complete
restitution to all parties affected by the violation, or both.
How often must the Commissioner examine all insurers to guard against insurance company insolvency?
At least once every 5 years, The Commissioner may conduct an examination or investigation of any company or
person as often as deemed appropriate, but at least once every 5 years.
Of the required 50 hours of prelicensing education, what is the minimum number of hours an applicant
must complete on the subject of ethics?
3 hours, Of the 50 hours, at least 3 hours will pertain specifically to insurance industry ethics.
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available
for the payment of losses or claims. The company is guilty of:
Misrepresentation. Issuing or circulating any sales material that is false or misleading would be considered
misrepresentation and is illegal.
Within how many days are insurers required to notify the Commissioner that a producer's employment
has been terminated?
30 days, The Commissioner must be notified within 30 days following the effective date of the termination.
Who has the right to assign incidents of ownership under a group life insurance policy?
The individual insured, A person insured under a group life insurance policy has the right to assign all or any
part of incidents of ownership under such policy, including, but not limited to, the privilege to have issued to the
insured an individual life insurance policy and the right to name a beneficiary.
Believing a producer has violated provisions of the Insurance Code, the Commissioner will schedule a
hearing:
To allow the producer to show why penalties should not be assessed. Once the Commissioner has reasonable
grounds to believe that a person has violated insurance laws, the Commissioner must conduct a hearing to allow
the person to defend themselves. Upon failure of the person to redeem their actions, the Commissioner may
impose fines or suspend or revoke the person's license.
A purchaser of life insurance policy has the right to return the policy for a full refund of the premium if
done within:
