Purchasing life insurance is one of the best things you can do to protect your family’s financial future. But it can feel like an overwhelming task. If you’re looking for a life insurance policy in Colorado, you’ll need to know about all the policies that are available, as well as the rules and regulations surrounding life insurance in Colorado. It is absolutely essential that you learn as much as possible about the Colorado life insurance market prior to purchasing a policy. But EZ is here to help: read our handy guide to life insurance in Colorado below, then speak to one of our agents to find the best policy for you.
How Life Insurance Works in Colorado
Essentially, a life insurance policy is a legally binding agreement between you and your chosen insurance provider. You agree to pay the company the required premiums in order to keep the policy active. And your insurance company will pay a death benefit to your family if you pass away while the policy is active. The death benefit is paid out as a one-time cash payment. Which your loved ones can use for anything from mortgage payments to college tuition to replacing your income.
Life insurance is definitely a good investment for people who have debts, dependents, or other financial obligations that would need to be met even after death. And, if you are the sole provider for your family, life insurance is a must to protect their financial security in the event of your passing.
Types of Life Insurance In Colorado
Almost anyone can find a life insurance policy that suits their specific needs and preferences thanks to the wide range of life insurance policy options currently on the market. The choice between one of the two main types of life insurance policies (term life insurance or permanent life insurance) will be largely dependent on both your budget, and by how far in the future you anticipate needing the coverage.
Term life insurance tends to be the most popular type of life insurance because of its affordable premiums. These policies are usually cheaper than permanent life insurance policies because they don’t cover you for your entire life. Instead, you get to choose the length of time that the policy will be in effect. The typical length of a policy’s term is 15 years. But it can be as short as one year or as long as 30. If you pass away while the policy is still in effect, your beneficiaries will receive a death benefit that is not subject to federal income tax. No matter how long your policy is in effect, your premium will never increase with most types of term life insurance policy.
There are several types of term policies:
Level Term Life Insurance
With level term life insurance, the death benefit and premiums are established at the time of purchase. They won’t change for the duration of the policy. The vast majority of people who buy term life insurance opt for level term policies.
Annual Renewable Term Life Insurance
Annual renewable life insurance is a term life insurance policy that lasts for a year. Policies are renewable annually, but the premium increases with each passing year.
Increasing Term Life Insurance
Your policy’s death benefit will grow at regular intervals if you have an increasing term life insurance policy. Your benefit amount might increase annually by 5%, for instance. Unlike with other types of term life, the cost of term insurance premiums is likely to rise and fall over time.
Decreasing Term Life Insurance
For decreasing term life insurance, the premium stays the same while the death benefit decreases over time. These policies are usually purchased for protection while you pay off a loan or mortgage. The death benefit will be reduced as the loan is paid off.
Return-of-Premium Life Insurance
With return-of-premium (ROP) term life insurance, your premium payments will be refunded if you don’t die before the policy’s expiration date. ROP policies are significantly more expensive than other types of term life insurance. But many people find the return of premiums feature very attractive.
Permanent Life Insurance
The main difference between a permanent life insurance policy and a term life insurance policy is that a permanent policy will remain in effect for the rest of your life. As long as you continue to pay your premiums on time. Because of this, and because permanent life policies also usually include a cash value component that builds over time, the premiums for these policies are typically higher than those of term life policies.
There are numerous types of permanent life insurance policies available:
Whole life insurance includes a guaranteed death benefit and can accumulate cash value. Interest accrues at a predetermined, tax-free rate for the duration of the life of the policy.
Universal life insurance policies are some of the most flexible policies out there. With this type of policy, you’ll be able to change the amount of your premium payments as well as your death benefit. The premium payments you make will go toward both the cost of insurance (COI) and your cash value. And eventually you will be able to pay your premiums with your cash value if you wish. In addition, if you’d like to lower your premiums you can also lower your death benefit amount at any time.
Indexed Universal Life Insurance
This type of permanent life insurance has a cash value that is tied to a stock index. So, you can earn money if your stocks do well. The premiums for this policy can be adjusted in the same way that it can be for a universal life policy as the cash value of the policy increases. Your indexed universal life insurance (IUL) could eventually become a no-premium policy. With the cash value covering the entire premium.
Variable Universal Life Insurance
A variable universal life (VUL) policy’s cash value, like the cash value of other permanent life insurance policies, can be invested. But with VUL you can invest in subaccounts, which are similar to mutual funds. And like traditional universal life insurance, the premiums of VUL policies can be adjusted.
Final expense insurance is a type of whole life insurance that might be a good choice if you are older or have medical issues that could make it difficult to get a traditional policy. These policies do not require a medical exam. But they can be expensive, and pay a relatively small benefit upon your death, usually between $2,000 and $35,000. This death benefit from final expense insurance is intended to cover final expenses such as a burial, cremation, or funeral service. But, with that being said, your beneficiary can spend the death benefit on whatever they want. Such as a vacation or property taxes.
Colorado Life Insurance Laws
When it comes to life insurance, the federal government generally leaves consumer protection and insurance industry regulation up to the individual states. And in Colorado, you’ll have consumer protections when you purchase life insurance through the Division of Insurance. Which is part of the Department of Regulatory Agencies. The insurance industry in Colorado is primarily governed by Title 10 of the Colorado Revised Statutes. Though other provisions have been adopted as consumer protection laws.
All of this means that you’ll have the following protections when it comes to your life insurance policy in Colorado:
Free Look Period
Unlike in some other states, there is no state-required free look period for life insurance policies in Colorado. This means that once you purchase a life insurance policy, the insurer is not required to allow you to return it for a refund. But while they are not required to do so, most insurance companies do allow you a reasonable period of time during which you can change your mind about your policy and receive a refund of all premiums. Depending on the insurance company, this period of time can range from 7 to 30 days. But the insurance company must apply this rule consistently and fairly to all policyholders. Before you buy an insurance policy, check with your insurance company to see what their rules are surrounding free look periods.
According to Colorado law, insurers must provide clients with a one-month grace period. Meaning that if you miss a payment, you will have a month to make up this payment before the insurance company can cancel your policy. This time frame is intended to prevent an insurance company from withholding a claim due to a minor payment delay. If you die during the grace period, the life insurance company is still obligated to pay the claim.
The Colorado Life & Health Insurance Guarantee Association will assist you in receiving compensation in the event that your insurer goes out of business. There is a possibility that the total amount of your policy will not be insured. Since you are only guaranteed compensation for up to $100,000 in lost cash value and $250,000 in death benefits if this happens. You need to have all of your life insurance payments up-to-date in order to collect this money. And your life insurance company needs to have had the appropriate licenses to conduct business in the state of Colorado.
Insurers have a certain amount of time known as the contestability period. During which they can challenge your coverage claims if they suspect fraud or misrepresentation. Once this period has passed, the policy is usually incontestable. In Colorado, a life insurance policy is considered incontestable after it has been in effect for at least two years from the date of issue.
There is no statute in Colorado governing how long an insurance company has to pay out a claim. But in most cases payments will have to be made within one month. But your insurance company will have to pay interest on the total death benefit starting on the date of death. The rate of interest increases after the initial 30 days have passed.
The price of your premiums will be affected by factors such as your age, health, and even your gender. The quickest way to find out what you can expect to pay for a policy is to get in touch with one of our EZ agents. They will be able to use the information you give them to find you free quotes that are tailored to you. But to give you an example of prices, a healthy 30-year-old man who does not smoke could pay anywhere from $22 to $65 per month for a 20-year $919,000 policy in Colorado.
Colorado Life Insurance Resources
In Colorado, there are several state and federal resources in place to help you if you have any problems with your insurer or policy. These resources include:
- Colorado Life and Health Insurance Protection Association – If your life insurance provider goes bankrupt, the Colorado Life and Health Insurance Protection Association will step in to help you. Financial aid is limited to $300,000 and is only available to Colorado residents.
- Colorado Insurance Guaranty Association (CIGA) – If you purchased your insurance through a CIGA member, the association will handle your claim and make any necessary payments in the event that your insurer cannot honor your policy.
Does Colorado require life insurance?
No, you are not required to have life insurance no matter where you live.
What are the best life insurance companies in Colorado?
In Colorado, there are many good options for life insurance. Bannerlife, Brighthouse Financial, AAA, State Farm, and Nationwide are at the top of the list.
How much does life insurance cost in Colorado?
There are many things that can affect how much life insurance costs, but here’s an example. If a healthy 30-year-old woman in Colorado buys a 20-year term policy for $919,000, she will pay an average of $28.81 per month. A healthy 30-year-old man, on the other hand, will pay about $35.87 for the same policy.
EZ Can Help!
Everyone has unique requirements, priorities, and financial constraints. At EZ we understand that you want the best financial security for yourself and your family without depleting your savings account. We make every effort to simplify the process of purchasing life insurance and offer all of our services for free. You won’t have to pay a dime for assistance with anything. From answering basic questions to navigating policy selection to the enrollment process and beyond. Simply enter your zip code in the space provided below or call us at 877-670-3560 to get started.