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Free New Mexico Life Insurance Practice Questions

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Sample Practice Questions

Try these 10 sample questions from the New Mexico Life Insurance practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

  1. 1Where must an individual file an application for an insurance license in New Mexico?

    1. A. With the superintendent, on the prescribed form
    2. B. With the secretary of state, on a corporate filing
    3. C. With each insurer the applicant plans to represent
    4. D. With the county clerk where the applicant resides

    Answer: A

    Explanation: Section 59A-11-2(A) says an individual application “shall be filed with, and on a form prescribed by, the superintendent.” Thus the superintendent receives the prescribed application.

    Reference: Chapter 59A Nmsa Current — NMSA 1978 §59A-11-2(A)

  2. 2A life insurer wants a consumer report about an applicant who has given no separate report permission. Which planned use of that applicant's report is the generally permissible insurance purpose identified by the FTC?

    1. A. Use it to select prospects for an unrelated policy campaign.
    2. B. Use it to assess the insurer's producer license renewal.
    3. C. Underwriting that consumer's pending life insurance application.
    4. D. Use it to evaluate another person's life insurance claim.

    Answer: C

    Explanation: "You must have a permissible purpose before obtaining a consumer report" Underwriting insurance involving this consumer is the stated permissible purpose; these other uses concern different transactions or people.

    Reference: FTC Consumer Reports: What Insurers Need to Know — FTC guidance, Obtaining Consumer Reports

  3. 3A client buys life insurance so an insurer bears the financial risk of an insured death. Which method of handling risk does that purchase illustrate?

    1. A. Retaining the risk through savings.
    2. B. Reducing the risk through prevention.
    3. C. Avoiding the activity that creates risk.
    4. D. Transferring the risk to an insurer.

    Answer: D

    Explanation: "Insurance - an economic device transferring risk from an individual to a company and reducing the uncertainty of risk via pooling." Insurance transfers financial risk to the company; saving, prevention, and avoidance handle the client's risk in different ways.

    Reference: NAIC Glossary of Insurance Terms — NAIC glossary, Insurance

  4. 4A New Mexico buyer procures life insurance on another person with benefits payable to the buyer. At what time does the statute test the buyer's insurable interest?

    1. A. At the time the insurance application is signed.
    2. B. At the time the first renewal premium is paid.
    3. C. At the time the insurance contract is made.
    4. D. At the time the insured's death claim is filed.

    Answer: C

    Explanation: "No person shall procure or cause to be procured any insurance contract upon the life or body of another individual unless the benefits under such contract are payable to the individual insured or his personal representatives, or to a person having, at the time such contract was made, an insurable interest in the individual insured." The statute measures the recipient's interest when the contract is made, not solely at another transaction point.

    Reference: New Mexico Insurance Code, Chapter 59A — NMSA 1978 §59A-18-4(A)

  5. 5A client wants term coverage with an unchanged face amount and premium throughout a specified term. Which policy type fits that request?

    1. A. Increasing term life insurance.
    2. B. Annual renewable term life insurance.
    3. C. Level term life insurance.
    4. D. Decreasing term life insurance.

    Answer: C

    Explanation: "Level term insurance: Provides a fixed death benefit and premium amount throughout the term" Level term keeps both death benefit and premium fixed during the term; the other term patterns change at least one of those features.

    Reference: NAIC Life Insurance — NAIC Life Insurance topic, Term life insurance

  6. 6An ordinary New Mexico life policy misses a premium after the first payment, and a claim arises during its contractual grace period. What is the policy's status during that period?

    1. A. It continues in full force during the grace period.
    2. B. It is suspended until the overdue premium is received.
    3. C. It is lapsed but may later be reinstated.
    4. D. It continues only as reduced paid-up coverage.

    Answer: A

    Explanation: "during which period of grace the policy shall continue in full force" Coverage stays in full force during the grace period; other statuses apply after lapse or a separate nonforfeiture election.

    Reference: New Mexico Insurance Code, Chapter 59A — NMSA 1978 §59A-20-4

  7. 7A deferred annuity owner is paying into a contract now and plans to receive regular income later. Which event marks the payout period?

    1. A. The contract first credits investment interest.
    2. B. The annuity begins making income payments.
    3. C. The owner makes the first premium contribution.
    4. D. The insurer opens the accumulation account.

    Answer: B

    Explanation: "During the payout period, the annuity makes income payments to you." The payout period begins with income payments; contributions and crediting belong to accumulation.

    Reference: NAIC Buyer's Guide for Deferred Annuities — NAIC Buyer's Guide for Deferred Annuities, p. 1

  8. 8A beneficiary receives a life policy's death benefit on an insured's death. The policy was not transferred for value or acquired in a reportable policy sale. How is the principal generally treated for federal income tax?

    1. A. The death-benefit principal is ordinary taxable income.
    2. B. The death-benefit principal is generally excluded from income.
    3. C. The death-benefit principal is taxable capital gain.
    4. D. The death-benefit principal is taxable above premiums paid.

    Answer: B

    Explanation: "Life insurance proceeds paid to you because of the death of the insured person generally aren’t taxable unless the policy was turned over to you for a price or was acquired in a reportable policy sale." The stated transfer exceptions are absent, so death-benefit principal generally is excluded even if proceeds exceed premiums.

    Reference: IRS Publication 525, Taxable and Nontaxable Income — IRS Publication 525, Life insurance proceeds

  9. 9What declaration does a New Mexico resident insurance-producer applicant make on the uniform application?

    1. A. The superintendent is appointed to receive process for nonresident transactions
    2. B. The statements are true, correct, and complete to the applicant's best knowledge and belief
    3. C. Required continuing-education credits were completed before a license continuation
    4. D. A home-state resident license is current and in good standing

    Answer: B

    Explanation: Section 59A-12-12(A) requires the applicant to declare “that the statements made in the application are true, correct and complete to the best of the applicant's knowledge and belief.” The other choices are real statements or conditions in nonresident, renewal, or service-of-process procedures, not the resident uniform-application declaration.

    Reference: Chapter 59A Nmsa Current — NMSA 1978 §59A-12-12(A)

  10. 10A life insurer needs a consumer report containing a new applicant's medical information. Whose permission is required before the CRA issues that report?

    1. A. The appointed producer's permission.
    2. B. The insurer's medical director's permission.
    3. C. The designated beneficiary's permission.
    4. D. The life insurance applicant's permission.

    Answer: D

    Explanation: "you must get the applicant’s permission before the CRA can issue the report" The FCRA medical-information rule names the applicant, not other participants in the insurance transaction.

    Reference: FTC Consumer Reports: What Insurers Need to Know — FTC guidance, Medical Information

Topics in this practice bank

These topics describe the available practice for New Mexico Life Insurance. Review the examination outline and its sources for scope and allocation details.

  • Insurance Regulation
    • Licensing
    • Licensing > Process (59A-11-2, 3, 59A-12-12; Reg 13.4.2.8, .9)
    • Licensing > Types of Licensees (Reg 13.4.2.7, .11)
    • Licensing > Types of Licensees (Reg 13.4.2.7, .11) > Insurance Producers (59A-12-2)
    • Licensing > Types of Licensees (Reg 13.4.2.7, .11) > Brokers (59A-12-3)
    • Licensing > Types of Licensees (Reg 13.4.2.7, .11) > Consultants (59A-11A-1-8)
    • Licensing > Types of Licensees (Reg 13.4.2.7, .11) > Nonresident (59A-12-25) (59A-11-24)
    • Licensing > Types of Licensees (Reg 13.4.2.7, .11) > Temporary (59A-11-4; 59A-12-19; Reg 13.4.2.12)
    • Licensing > Maintenance and Duration
    • Licensing > Maintenance and Duration > Expiration and Renewal (59A-11-10, 11)
    • Licensing > Maintenance and Duration > Address Change (59A-12-17) (59A-11-24)
    • Licensing > Maintenance and Duration > Continuing Education (59A-12-26; Reg 13.4.7.9, .12)
    • Licensing > Disciplinary Actions
    • Licensing > Disciplinary Actions > Suspension, Revocation, or Refusal to Renew (59A-11-8, 10, 14–16, 18)
    • Licensing > Disciplinary Actions > Cease and Desist Orders (59A-16-27)
    • Licensing > Disciplinary Actions > Penalties and Fines (59A-1-18, 59A-11- 17, 21)
    • State Regulation
    • State Regulation > Superintendent's General Duties and Powers (59A-2-8-10)
    • State Regulation > Company Regulation
    • State Regulation > Company Regulation > Certificate of Authority (59A-5-10)
    • State Regulation > Company Regulation > Unfair Claims Settlement Practices (59A-16-20)
    • State Regulation > Company Regulation > Complaint Record (59A-16-22)
    • State Regulation > Company Regulation > Appointment of Insurance Producer (59A- 11-12; Reg 13.4.2.17)
    • State Regulation > Company Regulation > Termination of Insurance Producer Appointment (59A-11-13; Reg 13.4.2.29)
    • State Regulation > Insurance Producer Regulation
    • State Regulation > Insurance Producer Regulation > Shared Commissions (59A-12-24)
    • State Regulation > Insurance Producer Regulation > Fiduciary Duties (59A-12-22)
    • State Regulation > Insurance Producer Regulation > Prohibited Premiums or Charges (59A-16- 24)
    • State Regulation > Unfair Insurance Trade Practices
    • State Regulation > Unfair Insurance Trade Practices > Misrepresentation (59A-16-4, 23)
    • State Regulation > Unfair Insurance Trade Practices > False Advertising (59A-16-4, 5)
    • State Regulation > Unfair Insurance Trade Practices > Twisting (59A-16-6)
    • State Regulation > Unfair Insurance Trade Practices > Defamation (59A-16-10)
    • State Regulation > Unfair Insurance Trade Practices > Unfair Discrimination (59A-16, 13, 17(D))
    • State Regulation > Unfair Insurance Trade Practices > Rebating (59A-16-16–18)
    • State Regulation > Unfair Insurance Trade Practices > Boycott, Coercion, or Intimidation (59A- 16-19)
    • State Regulation > Examination of Books and Records (59A-4-3, 4)
    • State Regulation > Insurance Fraud Act (59A-16C-1-16)
    • State Regulation > Consumer Information Privacy (59A-2-9.3; Reg 13.1.3.1-.28)
  • Federal Laws and Regulations
    • Fair Credit Reporting Act - Purpose
    • 18 United States Code (USC) Sections 1033 and 1034 - Purpose (Letter of Written Consent)
    • National Do Not Call List
  • General Insurance Concepts
    • Risk
    • Risk > Methods of Handling Risk (Avoidance, Retention, Sharing, Reduction, Transfer)
    • Risk > Elements of Insurable Risks
    • Risk > Definitions (Risk, Hazard, Peril, Loss)
    • Classifications of Insurers
    • Classifications of Insurers > Mutual, Stock, Fraternals
    • Classifications of Insurers > Admitted, Non-Admitted
    • Classifications of Insurers > Foreign, Domestic, Alien
    • Elements of a Contract
    • Elements of a Contract > Consideration
    • Elements of a Contract > Competent Parties
    • Elements of a Contract > Legal Purpose
    • Elements of a Contract > Offer
    • Elements of a Contract > Acceptance
    • Authority and Powers of Producers
    • Authority and Powers of Producers > Express
    • Authority and Powers of Producers > Implied
    • Authority and Powers of Producers > Apparent
    • Authority and Powers of Producers > The Law of Agency
    • Legal Interpretations Affecting Contracts
    • Legal Interpretations Affecting Contracts > Reasonable Expectations
    • Legal Interpretations Affecting Contracts > Indemnity
    • Legal Interpretations Affecting Contracts > Good Faith
    • Legal Interpretations Affecting Contracts > Fraud
    • Legal Interpretations Affecting Contracts > Warranties, Representations, Misrepresentations, and Concealment
  • Life Insurance Basics
    • Insurable Interest
    • Personal Uses of Life Insurance
    • Personal Uses of Life Insurance > Survivor Protection
    • Personal Uses of Life Insurance > Liquidity
    • Determining Amount of Personal Life Insurance
    • Determining Amount of Personal Life Insurance > Human Life Value Approach
    • Determining Amount of Personal Life Insurance > Needs Approach
    • Business Uses of Life Insurance
    • Business Uses of Life Insurance > Buy-Sell Funding
    • Business Uses of Life Insurance > Key Person
    • Business Uses of Life Insurance > Executive Bonuses
    • Factors in Premium Determination
    • Factors in Premium Determination > Mortality
    • Factors in Premium Determination > Interest
    • Factors in Premium Determination > Expense
    • Premium Frequency
    • Field Underwriting
    • Field Underwriting > Application Procedures
    • Field Underwriting > Warranties and Representations
    • Field Underwriting > Disclosures and Privacy
    • Policy Delivery
    • Policy Delivery > Effective Date of Coverage
    • Policy Delivery > Policy Review
    • Policy Delivery > Premium Collection
    • Policy Delivery > Statement of Good Health
    • Company Underwriting
    • Company Underwriting > Sources of Information
    • Company Underwriting > Classifications of Risk (Preferred, Standard, Substandard, Declined)
  • Types of Life Insurance Policies
    • Term Life Insurance
    • Term Life Insurance > Level
    • Term Life Insurance > Decreasing
    • Term Life Insurance > Increasing Term
    • Whole (Permanent, Ordinary) Life Insurance
    • Whole (Permanent, Ordinary) Life Insurance > Single Premium
    • Whole (Permanent, Ordinary) Life Insurance > Continuous Premium
    • Whole (Permanent, Ordinary) Life Insurance > Limited Payment
    • Whole (Permanent, Ordinary) Life Insurance > Adjustable Life
    • Universal Life
    • Variable Life
    • Variable Universal
    • Indexed Universal Life
    • Specialized Policies
    • Specialized Policies > Joint Life
    • Specialized Policies > Survivorship Life
    • Specialized Policies > Juvenile
    • Group Life Insurance
    • Group Life Insurance > Eligible Groups
    • Group Life Insurance > Characteristics of Group Life Insurance
  • Life Insurance Policy Provisions, Options, and Riders
    • Standard Life Insurance Provisions
    • Standard Life Insurance Provisions > Ownership
    • Standard Life Insurance Provisions > Assignment
    • Standard Life Insurance Provisions > Right to Examine (Free Look)
    • Standard Life Insurance Provisions > Payment of Premiums
    • Standard Life Insurance Provisions > Grace Period
    • Standard Life Insurance Provisions > Misstatement of Age/Sex
    • Standard Life Insurance Provisions > Incontestability
    • Standard Life Insurance Provisions > Reinstatement
    • Standard Life Insurance Provisions > Entire Contract
    • Beneficiary Designation Options
    • Beneficiary Designation Options > Individuals
    • Beneficiary Designation Options > Classes
    • Beneficiary Designation Options > Minors
    • Types of Beneficiaries
    • Types of Beneficiaries > Primary and Contingent
    • Beneficiary-Related Clauses
    • Beneficiary-Related Clauses > Common Disaster
    • Settlement Options
    • Settlement Options > Cash Payment (Lump Sum)
    • Settlement Options > Interest Only
    • Settlement Options > Life Income
    • Settlement Options > Fixed-Period
    • Settlement Options > Fixed-Amount Installments
    • Settlement Options > Joint
    • Settlement Options > Last Survivor
    • Nonforfeiture Options
    • Nonforfeiture Options > Cash Surrender Value
    • Nonforfeiture Options > Extended Term
    • Nonforfeiture Options > Reduced Paid-Up Insurance
    • Policy Loan and Withdrawal Options
    • Policy Loan and Withdrawal Options > Loans
    • Policy Loan and Withdrawal Options > Automatic Premium Loans
    • Policy Loan and Withdrawal Options > Withdrawals Partial Surrenders
    • Dividend Options
    • Dividend Options > Paid-Up Additions
    • Dividend Options > Cash Payment (Lump Sum)
    • Dividend Options > One Year Term
    • Dividend Options > Reduction of Premium
    • Dividend Options > Accumulation at Interest
    • Disability Riders
    • Disability Riders > Waiver of Premium
    • Disability Riders > Disability Income Benefit
    • Disability Riders > Payor Benefit Life
    • Riders Covering Additional Insureds
    • Riders Covering Additional Insureds > Spouse
    • Riders Covering Additional Insureds > Children
    • Riders Covering Additional Insureds > Family term rider
    • Riders Affecting Death Benefit Amount
    • Riders Affecting Death Benefit Amount > Accidental Death
    • Riders Affecting Death Benefit Amount > Guaranteed Insurability
    • Riders Affecting Death Benefit Amount > Cost of Living
    • Riders Affecting Death Benefit Amount > Return of Premium
    • Riders Affecting Death Benefit Amount > Accelerated (Living) Benefit Provision Rider
    • Riders Affecting Death Benefit Amount > Long-Term Care Rider
    • Policy Exclusions
  • Annuities
    • Annuity Principles and Concepts
    • Annuity Principles and Concepts > Accumulation Period versus Annuity Period
    • Annuity Principles and Concepts > Owner, Annuitant, and Beneficiary
    • Immediate versus Deferred Annuities
    • Annuity (Benefit) Payment Options
    • Annuity (Benefit) Payment Options > Life Contingency Options
    • Annuity (Benefit) Payment Options > Annuities Certain
    • Annuity (Benefit) Payment Options > Pure Life versus Life with Guaranteed Minimum
    • Annuity (Benefit) Payment Options > Single Life versus Multiple Life
    • Annuity Products
    • Annuity Products > Fixed Annuities
    • Annuity Products > Equity Indexed Annuities
    • Annuity Products > Variable Annuities
    • Uses of Annuities
    • Uses of Annuities > Lump-Sum Settlements
    • Uses of Annuities > Retirement Income
    • Uses of Annuities > Long-Term Care Rider
    • Uses of Annuities > Guaranteed Minimum Withdrawal Benefit (GMWB)
  • Federal Tax Considerations for Life Insurance
    • Taxation of Personal Life Insurance and Annuities
    • Taxation of Personal Life Insurance and Annuities > Premiums
    • Taxation of Personal Life Insurance and Annuities > Dividends
    • Taxation of Personal Life Insurance and Annuities > Settlements
    • Taxation of Personal Life Insurance and Annuities > Last In First Out (LIFO) and First In First Out (FIFO)
    • Taxation of Personal Life Insurance and Annuities > Surrenders and Withdrawals
    • Modified Endowment Contracts (MECs)

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