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Life Health > Life Insurance

Colorado May Protect More Life Cash Value

By Allison Bell

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NU Online News Service, April 4, 8:18 p.m. – The Colorado Senate is considering a bill, H.B. 1330, that could help the state’s consumers protect more of the cash value of their life insurance from creditors.

The bill would increase the amount exempted from writs of execution and writs of attachment to $50,000, from the current limit of $25,000.

The bill also seeks to discourage consumers with shaky finances from abusing the cash-value exemption.

Today, Colorado does allow creditors to go after the first $25,000 in cash value, to the extent that the increase in cash value comes from funds contributed during the preceding 24 months.

H.B. 1330 would increase the lookback period to 48 months.

The bill, which was introduced by Rep. Joe Stengel, R-Arapahoe, Colo., affects only life insurance policy cash values. Colorado already allows an unlimited exemption for policy death benefits when parties other than the estate of the insured are the beneficiaries.

The House passed the bill in March by a 64-to-1 vote, according to the official House Journal.

The bill is now under the jurisdiction of the Senate Public Policy and Planning Committee. The lead sponsor in the Senate is Sen. Jim Dyer, R-Arapahoe.

The Colorado Association of Insurance and Financial Advisors, Denver, is spearheading the effort to increase the exemption limit, and it also led the last successful increase campaign, which raised the limit to $25,000, from $5,000, seven years ago.

This seems to be a good year to take up the issue again, because “people are getting older,” says Clif Sams, a Colorado association lobbyist.

A $50,000 limit might be just enough to give older consumers and others the protection they need, Sams adds.

The Colorado chapter helped build support for H.B. 1330 by having agents from around the state explain the issue to their representatives. So far, no obvious opposition has surfaced, but Sams is worried about the Senate, where the 1995 exemption-increase bill faced some resistance.

The Colorado chapter of the National Association of Insurance and Financial Advisors is far from the only chapter interested in the exemption-increase issue.

“We’re all looking at it,” Sams says.

State chapters are also learning from one another. Sams notes that he included an increase in the lookback period in his bill because he learned that some state associations have had trouble passing exemption-increase bills without adequate lookback periods.

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