Key Takeaways
- Colorado requires a 10-day free look period for annuities (30 days for age 60+)
- Colorado has adopted the NAIC Suitability in Annuity Transactions Model Regulation (best interest standard)
- Senior-specific protections apply to annuity sales to those age 60 and older
- Annuity replacements require detailed comparison of existing and proposed contracts
- Colorado requires clear disclosure of surrender charges and fees
Colorado Annuity Regulations
Colorado has adopted comprehensive annuity regulations to protect consumers, particularly seniors, from unsuitable sales and deceptive practices.
Free Look Period
Colorado provides free look periods based on age:
| Buyer Age | Free Look Period |
|---|---|
| Under 60 | 10 days |
| 60 and older | 30 days |
- Applies to all annuity types (fixed, variable, indexed)
- Buyer can return for full premium refund
- No penalty for exercising free look
- Period begins when policy is delivered
Suitability Requirements (Best Interest Standard)
Colorado has adopted the NAIC Suitability in Annuity Transactions Model Regulation with the best interest standard:
Producer Duties
Before recommending an annuity, the producer must:
- Act in the consumer's best interest at the time of recommendation
- Make reasonable efforts to obtain customer information
- Analyze whether the recommendation is suitable
- Document the basis for the recommendation
- Disclose all material information about the product
Required Information
| Category | Information Required |
|---|---|
| Financial Status | Income, liquid assets, financial needs |
| Tax Status | Tax bracket, qualified vs. non-qualified funds |
| Investment Objectives | Goals, time horizon, risk tolerance |
| Existing Coverage | Current annuities and life insurance |
| Liquidity Needs | Expected need for funds |
Best Interest Obligations
- Recommendations must be in the best interest of the consumer
- Compensation cannot be the primary motivator
- Material conflicts must be identified and disclosed
- Producer must act with care, skill, prudence, and diligence
Senior-Specific Protections
Colorado has special rules for annuity sales to seniors (age 60+):
Extended Free Look
For buyers age 60 or older:
- 30-day free look period (vs. 10 days for younger buyers)
- Allows more time to review and consult with family
- Cannot pressure or rush the sale
- Producer must inform senior of this right
Enhanced Disclosures
Seniors must receive:
- Clear explanation of surrender charges
- Disclosure of all fees and costs
- Comparison with existing contracts if replacement
- Written confirmation of suitability
Exam Tip: The 30-day free look for seniors (60+) is a Colorado-specific consumer protection. Remember this differs from the standard 10-day period.
Surrender Charge Disclosures
Colorado requires clear disclosure of surrender charges:
| Disclosure | Requirement |
|---|---|
| Surrender Schedule | Must be clearly disclosed |
| Free Withdrawal | Must explain penalty-free access |
| Impact on Benefits | Must explain effect of early withdrawal |
| Plain Language | Must be understandable to consumer |
Replacement Requirements
When replacing an existing annuity, producers must:
Documentation Required
- Comparison statement - Side-by-side comparison of old and new contract
- Replacement form - Signed acknowledgment of replacement
- Suitability analysis - Why replacement is appropriate
- Notice to existing insurer - Notification of pending replacement
Red Flags
The DOI scrutinizes replacements for:
- Short holding periods before replacement
- Surrender charges not fully explained
- New surrender charge period starting over
- Commission-motivated churning
What is the free look period for an annuity purchased by a 55-year-old in Colorado?
Under Colorado's annuity suitability requirements, what standard must producers meet?