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Colorado Real Estate Exam- Ch 2
Licensing Requirements Questions and
Answers Latest 2026
E&O Insurance Ans: E&O insurance protects the Broker
against loss from oversights in filling out
forms and conducting business. It does not protect the
Broker if fraud is
involved or alleged in the transaction.
All activelicensed Brokers must carry E&O insurance. The
CREC requires that it
be on file with them or they may inactivate a license. The
insurance is
purchased through private carriers and an Employing
Broker can help you with
obtaining your insurance. Approved vendors are also
listed on the DORA web
pages. An often asked question for testing is who must
carry the insurance. The
answer is all active licensed Agents including the
Employing Broker and..... any
© 2025 All rights reserved
, 2 | Page
Corporation or LLC that is doing business as a firm. This
last part trips new
Agents up. In this case as in others, a LLC(Limited
Liability Corporation) or
regular Corporation are viewed as a person or personal
entity. As such they also
need E&O insurance. The best example is a Broker that
wants to have a
brokerage firm. Let's say Gary wishes to be an Employing
Broker. Gary could
operate as a sole proprietor and just work as such. Later
Gary learns that
working as a sole proprietor he might be sued one day,
and since he is the
business, his home and personal assets would be at risk.
His attorney tells him
he should consider an LLC or limited liability company as
a vehicle to protect
himself and conduct business. By forming the company,
now it is considered its
own entity. Gary is protected and has limited his liability
to the assets of the
© 2025 All rights reserved
, 3 | Page
company and is less at risk personally. Since the
company has its own liability,
it must carry E&O insurance and Gary must carry it for
himself also. In
addition, any agent Gary hires must have E&O insurance
as well.
Active and Inactive Licenses Ans: How can a license
become inactive?The most common ways are a broker
may
place his or her license on inactive status voluntarily or
the Real Estate
Commission may suspend your license for cause.
A couple of other ways include: Failure of the Employing
Broker to notify the
Commission of a change of locationor failure of the
Broker Associate to notify
the Commission of a move from one firm or location to
another. If the
Employing Broker moves their office, the Employing
Broker's license and all
the licenses under him or her become inactive if the
CREC is not notified, and if
© 2025 All rights reserved
Colorado Real Estate Exam- Ch 2
Licensing Requirements Questions and
Answers Latest 2026
E&O Insurance Ans: E&O insurance protects the Broker
against loss from oversights in filling out
forms and conducting business. It does not protect the
Broker if fraud is
involved or alleged in the transaction.
All activelicensed Brokers must carry E&O insurance. The
CREC requires that it
be on file with them or they may inactivate a license. The
insurance is
purchased through private carriers and an Employing
Broker can help you with
obtaining your insurance. Approved vendors are also
listed on the DORA web
pages. An often asked question for testing is who must
carry the insurance. The
answer is all active licensed Agents including the
Employing Broker and..... any
© 2025 All rights reserved
, 2 | Page
Corporation or LLC that is doing business as a firm. This
last part trips new
Agents up. In this case as in others, a LLC(Limited
Liability Corporation) or
regular Corporation are viewed as a person or personal
entity. As such they also
need E&O insurance. The best example is a Broker that
wants to have a
brokerage firm. Let's say Gary wishes to be an Employing
Broker. Gary could
operate as a sole proprietor and just work as such. Later
Gary learns that
working as a sole proprietor he might be sued one day,
and since he is the
business, his home and personal assets would be at risk.
His attorney tells him
he should consider an LLC or limited liability company as
a vehicle to protect
himself and conduct business. By forming the company,
now it is considered its
own entity. Gary is protected and has limited his liability
to the assets of the
© 2025 All rights reserved
, 3 | Page
company and is less at risk personally. Since the
company has its own liability,
it must carry E&O insurance and Gary must carry it for
himself also. In
addition, any agent Gary hires must have E&O insurance
as well.
Active and Inactive Licenses Ans: How can a license
become inactive?The most common ways are a broker
may
place his or her license on inactive status voluntarily or
the Real Estate
Commission may suspend your license for cause.
A couple of other ways include: Failure of the Employing
Broker to notify the
Commission of a change of locationor failure of the
Broker Associate to notify
the Commission of a move from one firm or location to
another. If the
Employing Broker moves their office, the Employing
Broker's license and all
the licenses under him or her become inactive if the
CREC is not notified, and if
© 2025 All rights reserved
