State RegulationsCO specificDifficulty 2/5
A beneficiary in Colorado Springs notifies the insurer in writing that she elects to receive the death benefit under a monthly settlement option rather than a lump sum. Under C.R.S. § 10-7-112, how is interest on the proceeds treated?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
C.R.S. § 10-7-112 contains an explicit exception: when the beneficiary elects in writing to take the proceeds under a non-lump-sum settlement option, no interest accrues on the proceeds. The rationale is that the beneficiary has chosen a structured payout, so the insurer is not holding money the beneficiary has demanded. The interest mandates of the statute protect beneficiaries awaiting their lump-sum proceeds, not those who voluntarily select installments.
Why the other options are wrong
- A) No deposit-rate interest runs once a written settlement-option election is made; the statute's exception controls.
- B) A deferral chosen by the beneficiary is not an insurer denial, so no judgment-rate interest applies.
- D) There is no doubled rate for extended payouts; a written settlement-option election ends interest entirely.
Memory hook
Choose installments in writing, waive the interest — you picked the plan.