State RegulationsCO specificDifficulty 2/5
A producer in Colorado Springs persuades an insured to lapse an existing life policy and buy a new one by overstating the old policy's cash value and hiding its surrender charges. This practice is:
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
C.R.S. § 10-3-1104(1)(a) prohibits misrepresenting a policy's terms to induce a policyholder to lapse, forfeit, exchange, convert, or surrender existing insurance — Colorado's twisting hook. Distorting the old policy's cash value and surrender charges to force a replacement is exactly that violation, and the Colorado Commissioner of Insurance may act on it.
Why the other options are wrong
- A) A signed new application does not authorize misleading statements about the existing policy; the misrepresentation, not the replacement paperwork, is the violation.
- B) No premium or value was returned to the insured, so the rebate prohibition is not implicated.
- C) Controlled business concerns insurance on the producer's own life, family, employees, or property interests, not replacement conduct.
Memory hook
Twist the truth about the old policy and Colorado calls it twisting.