Free Colorado life insurance practice test.

Answer B. Variable life

Variable life places cash value in separate investment accounts, so values fluctuate with market performance and it requires a securities license to sell. Whole life has guaranteed cash value in the general account. Term has no cash value. Modified whole life only changes the premium schedule, not the investment structure.

Answer C. The insurer automatically pays the premium using the policy's available cash value

The automatic premium loan provision uses the policy's cash value to pay an overdue premium, keeping the policy in force. It does not cause immediate termination, it is not the same as the extended term nonforfeiture option that the owner would elect, and it does not shift payment duty to the beneficiary.

Answer A. Collect a statement of continued good health or report the change to the insurer

If health changed between application and delivery, the producer must obtain a statement of continued good health or report the change so the insurer can decide, because the application must remain accurate at delivery. Delivering and saying nothing hides a material change, so that is wrong. The producer cannot cancel the policy, only the insurer can act, so that is wrong. Producers cannot set or change premiums, so that is wrong.

Answer D. The death benefit is paid, minus any overdue premium

The grace period keeps coverage in force for a set time after a missed premium, so a death during that period results in payment of the death benefit less the unpaid premium owed. Denying the claim ignores the grace period protection. A premium refund is not the remedy, and the policy is not voided since it was in force.

Answer B. Grace period

The grace period is the time after a premium due date during which the policy remains in force even though the premium has not yet been paid. The free look applies only at policy issue for returning the policy. The reinstatement period allows restoring a policy that has actually lapsed, which is a later step. The contestable period is the time the insurer may challenge a claim for misstatements, not related to premium payment.

Answer A. A traditional IRA

A traditional IRA allows pre-tax (deductible) contributions and taxes the money when it is withdrawn. A Roth IRA is the opposite: contributions are after-tax and qualified withdrawals are tax-free. A tax-free savings account is not a US retirement vehicle. A whole life dividend account is not a retirement plan and dividends are treated as return of premium.

Answer D. Pays the face amount at a specified date or upon death, whichever comes first

An endowment pays the face amount if the insured lives to a stated maturity date, or pays it as a death benefit if the insured dies sooner. Paying only at death describes whole or term life. A dividend-only description is wrong. Coverage tied to a loan describes credit life, not an endowment.

Answer D. Policy dividend

Dividends are paid on participating policies when the insurer has favorable results such as lower claims or expenses, and they are treated as a return of premium. Cash surrender value is what you get for canceling the policy, a policy loan is money borrowed against cash value, and reduced paid-up is a nonforfeiture option, none of which describes a share of company results.

Answer A. A conditional receipt that provides coverage if the applicant proves insurable

A conditional receipt provides temporary coverage that becomes effective only if the applicant is found insurable under the insurer's underwriting rules. It is not a guarantee of coverage (so the binding certificate answer is wrong). A free look is a separate right that begins at delivery, not at application, so that is wrong. A refund guarantee is not what a receipt provides, so that is wrong.

Answer B. Colorado allows reinstatement within a limited window, often with a late fee, before the exam is required again

Colorado permits reinstatement of a lapsed license within a limited period, typically with payment of a late or reinstatement fee, before a person must re-qualify by exam. 'Never' and a mandatory five year wait are too harsh and incorrect. Reinstatement is not free or unconditional, so automatic no-fee reinstatement is wrong.

Answer A. The Colorado Life and Health Insurance Protection Association

The Colorado Life and Health Insurance Protection Association is the state guaranty association that steps in to protect covered policyholders when a member life or health insurer becomes insolvent. The Division of Insurance regulates but does not pay claims from an operating fund. The FDIC insures bank deposits, not insurance policies. The NAIC is a coordinating organization of regulators, not a guaranty fund.

Colo. Rev. Stat. 10-20-101 et seq. (Life and Health Insurance Protection Association Act)

Answer A. It provides income to eligible dependents when a covered worker dies

Social Security survivor benefits provide income to eligible dependents (such as a spouse or children) after a covered worker dies. It does not fully replace the worker's income. It does not pay estate taxes. It is not a refund of taxes paid.

Answer B. Credit life insurance

Credit life is designed to pay off a specific debt if the borrower dies, and the benefit typically declines as the loan is paid down. An endowment matures at a set date. Variable and whole life are permanent policies not tied to a single loan balance.

Answer D. Accidental death benefit rider

The accidental death benefit rider pays an extra amount (often double the face) if death results from an accident. Waiver of premium keeps the policy in force if the insured is disabled, guaranteed insurability lets the insured buy more coverage without proving insurability, and cost of living adjusts benefits for inflation. None of those pay extra for accidental death.

Answer C. When the policy is actually placed in the policyowner's hands

For purposes of the free look, delivery is complete when the policyowner actually receives the policy, because that is when the owner can begin reviewing it. Printing by the insurer or receipt by the producer does not put it in the owner's hands, so those are wrong. Premium clearing is a payment event, not delivery, so that is wrong.

Answer B. Notify the Commissioner within the required timeframe and provide the reason when requested

When an insurer ends an appointment, especially for cause, Colorado requires the insurer to notify the Commissioner and to supply the reason if asked. Appointments do not simply lapse silently. Notifying only the producer ignores the required Division notice. Waiting for renewal fails the prompt-reporting duty.

Answer C. Misrepresentation

Making false or misleading statements about a policy's features is misrepresentation, a prohibited unfair trade practice. Twisting is using misrepresentation specifically to get someone to lapse and replace an existing policy, which is not described here. Rebating is giving something of value to induce a purchase. Commingling is mixing client premium funds with personal funds. Only misrepresentation fits.

Colo. Rev. Stat. 10-3-1104 (unfair methods of competition and deceptive practices)

Answer A. No tax is due at the time of the rollover

A properly executed direct rollover from one qualified plan to an IRA is not a taxable event; taxes are deferred until later withdrawals. The balance is not taxed at the time of transfer. No early penalty applies to a proper rollover. There is no rule taxing only half.

Answer A. Universal life

Universal life offers flexible premiums and adjustable death benefits, its defining feature. Whole life has fixed premiums and a fixed face amount. Level term has a fixed premium and benefit for the term. An endowment pays out at a set date or death but is not premium-flexible.

Answer A. The accelerated death benefit pays part of the face amount early to a terminally ill insured, while waiver of premium keeps the policy in force during disability

The accelerated death benefit lets a terminally or chronically ill insured collect a portion of the face amount while still living. Waiver of premium keeps the policy active by excusing premiums during a qualifying disability. The two serve different purposes, they are not both simple death benefits, their functions are not swapped, and they are not limited to term insurance.