Free Colorado Life Insurance Practice Exam Online

Correct answer: B. Two years

Correct. C.R.S. § 10-7-102 requires the policy to be incontestable after being in force during the insured's lifetime for two years from its date, except for nonpayment of premium and certain excluded-risk provisions.

• A: One year is shorter than the incontestability period Colorado law requires for life policies.
• C: Five years is longer than Colorado's standard two-year incontestability period.
• D: The policy is contestable during the first two years for material misrepresentation; it does not become incontestable at issue.

Correct answer: B. Free-look period

Correct. The free-look period gives a new annuity owner a set number of days after delivery to review the contract and cancel it for a refund if not satisfied.

• A: The grace period allows late premium payment on certain contracts without lapse; it is not the post-delivery cancellation right.
• C: The contestable period is when an insurer may challenge a contract for misrepresentation; it does not describe the buyer's right to cancel.
• D: The accumulation period is the phase during which a deferred annuity's value grows before income payments begin; it is unrelated to a cancellation right.

Correct answer: B. Term life insurance

Correct. Term insurance covers a fixed period (e.g., 10, 20, or 30 years), builds no cash value, and is priced purely for mortality risk, making it the least expensive form of protection initially.

• A: Whole life is permanent coverage that builds cash value, so its premiums are higher than term for the same face amount at issue.
• C: Universal life is a permanent, flexible-premium policy with a cash value component, not the lowest-cost pure-protection product.
• D: Variable life is a permanent policy whose cash value is invested in separate accounts and carries investment risk; it is not the low-cost term product.

Correct answer: C. Universal life insurance

Correct. Universal life unbundles the mortality charge, expense charge, and interest credited to cash value, giving the owner flexibility over premium payments and, within limits, the death benefit.

• A: Term insurance has no cash value and no flexible premium feature.
• B: Traditional whole life has fixed, scheduled premiums and a guaranteed cash value schedule; it does not offer flexible premiums.
• D: Credit life insurance is a small, decreasing-term product sold to cover an outstanding loan balance, not a flexible-premium permanent product.

Correct answer: B. The performance of separate account investment subaccounts chosen by the policyowner

Correct. Variable life premiums (net of charges) are invested in separate account subaccounts selected by the owner, so cash value and, subject to guaranteed minimums, the death benefit move with market performance.

• A: Dividends apply to participating whole life policies, not to the investment-driven cash value of variable life.
• C: The Division of Insurance does not set an interest rate that drives variable life cash value; that is a market-based product feature.
• D: Health status affects underwriting at issue, not the ongoing cash value performance of an in-force variable policy.