The sale and administration of life insurance in Colorado are governed by a series of state statutes and regulations designed to protect consumers, promote ethical practices, and ensure that insurance professionals act with integrity and competence.
This chapter provides an in-depth exploration of the Colorado laws specific to life insurance, including the rules on policy replacement, disclosure, advertising, suitability, group life coverage, insurable interest, and lapse notifications.
The Colorado Division of Insurance (DOI), under the Department of Regulatory Agencies (DORA), oversees compliance with these statutes to maintain a fair and trustworthy insurance marketplace. As a licensed producer, understanding these rules is not only required for passing the state licensing exam but is also vital for serving clients responsibly and avoiding costly regulatory violations.
These laws ensure that:
Consumers receive transparent and truthful information before purchasing life insurance or annuities.
Producers act in the best interests of their clients, ensuring that products are suitable for each individual’s financial situation.
Insurers maintain clear, timely, and ethical claims and replacement procedures.
Throughout this chapter, you’ll find clear explanations, real-world examples, and statute references (e.g., C.R.S. §10-7-109) and DOI regulations (e.g., Reg. 4-1-4). This format mirrors the Pearson VUE Colorado Licensing Exam Outline, helping you master both the knowledge and application of the law.
In professional practice, these statutes form the foundation for how you interact with clients, structure recommendations, and maintain compliance. Understanding the intent behind each regulation—to protect the policyholder—will help you:
Avoid unfair trade practices or misleading sales tactics
Maintain accurate and ethical advertising
Protect clients’ rights during replacements or policy lapses
Handle claims and communications transparently
By mastering this chapter, you’ll be well prepared not only for the Colorado Life Insurance licensing exam but also for a career grounded in professional integrity and regulatory compliance.
References: Reg. 4-1-4
A replacement occurs when an existing life insurance policy or annuity is terminated, converted, or reduced in value due to the purchase of a new policy. To ensure transparency and protect consumers from being misled, Colorado Regulation 4-1-4 requires:
Agents to provide the applicant with a Notice Regarding Replacement of Life Insurance or Annuities at the time of application.
The form must clearly identify both the new and existing policies and include a summary of the possible disadvantages of replacing existing coverage.
Both the applicant and the producer must sign the notice.
Insurers and producers must maintain replacement records for at least five years or until the next market conduct examination, whichever is longer. Records must include the signed replacement notices, policy comparison statements, and any correspondence related to the replacement transaction.
Example: If an agent replaces a $100,000 whole life policy with a new universal life policy, the insurer must keep documentation proving that the required disclosure and comparison were provided to the client.
References: C.R.S. §§ 10-7-106; 10-7-201 through 10-7-207
Group life insurance provides coverage to a group of individuals under a single master policy issued to an employer, association, or other eligible group sponsor.
The policyholder (employer or group sponsor) owns the master policy; insured individuals receive certificates of coverage.
Minimum group size and eligibility criteria must meet statutory requirements.
Coverage must be offered without individual evidence of insurability if the insured joins within the eligibility period.
Group policies must contain conversion provisions, allowing a member to convert to an individual policy upon termination of employment or eligibility.
Example: An employee leaving a company can convert their group life coverage to an individual policy without proof of insurability, as long as they apply within 31 days.
Reference: C.R.S. § 10-7-109
Colorado allows a suicide exclusion in life insurance policies only during the first two years after policy issuance. If the insured commits suicide within that period, the insurer may deny payment of the death benefit but must refund all premiums paid.
After two years, the policy must pay full benefits regardless of the cause of death.
References: C.R.S. § 10-7-302; Reg. 4-1-4
All individual life insurance policies must include a free look period of at least 15 days after the policy is delivered. During this time, the policy owner may review the policy and return it for a full refund of premiums if unsatisfied.
Policies must also include clear, written disclosures summarizing key terms, benefits, exclusions, and potential surrender charges.
Example: If a client receives their policy on June 1, they may return it by June 16 for a full refund if they change their mind.
Reference: C.R.S. § 10-7-112 If an insurer fails to pay life insurance proceeds within a reasonable time (typically 30 days after proof of death is received), it must pay interest on the delayed payment from the date of death until the date payment is made.
This law encourages timely claims handling and ensures that beneficiaries receive the full value owed to them.
References: C.R.S. § 10-7-103; Regs. 1-2-18; 4-1-1; 4-1-2; 4-1-3; 4-1-8; 4-1-11; 4-1-12
Producers may not use misleading, deceptive, or coercive sales tactics. This includes misrepresenting policy benefits, dividends, or surrender values.
Before recommending a life insurance or annuity product, agents must determine that the product is suitable for the client’s financial objectives, age, and needs. This involves collecting relevant financial and personal information and documenting the rationale for the recommendation.
Agents must provide written disclosures regarding:
All advertisements must be truthful, clear, and not misleading. Any testimonials, statistics, or performance data must be factual and substantiated.
Example: An advertisement claiming “guaranteed 10% returns” on an annuity would violate Reg. 4-1-1 unless the guarantee is accurate, clearly explained, and approved by the Division of Insurance.
References: C.R.S. §§ 10-7-701 through 10-7-710
A policyholder must have an insurable interest in the life of the insured at the time of policy issuance. This means the policyowner must reasonably expect to benefit from the insured’s continued life or suffer a loss from their death.
Examples of valid insurable interests:
Reference: C.R.S. § 10-7-105.5 Before a life insurance policy may lapse for nonpayment of premium, the insurer must provide written notice to the policyowner and any designated secondary addressee at least 25 days before the lapse date. This provision protects policyholders—especially elderly insureds—from unintentionally losing coverage due to missed payments.