State RegulationsCO specificDifficulty 3/5
A Boulder man buys a life policy on his business partner's life, relying on the partner's ongoing value to the business. Years later the partner retires, and the man keeps the policy in force. When the partner dies, the insurer investigates the claim. What is the outcome under C.R.S. § 10-7-701 through 710?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
C.R.S. § 10-7-701 through 710 requires insurable interest only at the time the policy is issued. The Boulder owner had a valid business-partner interest at issuance, so the partner's later retirement does not void the policy and the death claim is payable.
Why the other options are wrong
- A) The insurable interest need not continue after issuance; ending the business relationship does not void the policy.
- C) There is no retroactive cancellation or premium refund for an interest that ends after issuance.
- D) No extension from the Colorado Division of Insurance is needed; the policy stands on its original issue-date validity.
Memory hook
Tested at issue, good for life — 701 through 710.