State RegulationsCO specificDifficulty 2/5
A Colorado lender tells a business borrower that the loan will be approved only if the borrower buys the required property insurance from the lender's affiliated agency. Under Colorado law, this arrangement is:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
C.R.S. § 10-3-1105 prohibits requiring a debtor to obtain the insurance securing a loan from any particular insurer, producer, or agency. The lender may require insurance to protect its collateral, but dictating the source crosses into debtor coercion and exposes the lender and its agency to Colorado Division of Insurance enforcement under the unfair-trade-practice framework that includes C.R.S. § 10-3-1104(1)(d).
Why the other options are wrong
- A) Cross-selling must be voluntary; tying the loan approval to a mandated source is exactly what § 10-3-1105 forbids.
- C) An insurable interest in the collateral justifies requiring coverage, not requiring coverage from the lender's own agency.
- D) Even the lowest quote cannot be forced on the borrower as a loan condition; the choice of source must stay with the debtor.
Memory hook
The lender may require insurance, never a particular insurer (§ 10-3-1105).