State RegulationsCO specificDifficulty 3/5
Which of the following life insurance arrangements would fail Colorado's insurable interest requirement under C.R.S. § 10-7-701?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
C.R.S. § 10-7-701 requires an insurable interest at the time the policy is issued, meaning a lawful and substantial interest in the continued life of the insured. An applicant with no financial or close personal connection to the insured has no such interest, so the arrangement is merely a wager on another's life and fails the requirement; policies on one's own life, a spouse, or a business partner all rest on recognized interests.
Why the other options are wrong
- A) Every person has an insurable interest in his or her own life, so this arrangement satisfies the requirement.
- B) A spouse has a recognized insurable interest in the other spouse's life, so this policy meets the issue-time requirement.
- D) A business partner's substantial financial stake in the other partner's continued life creates a valid insurable interest.
Memory hook
No stake in the heartbeat — no policy.