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Free New Mexico Personal Lines Insurance Practice Questions

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Sample Practice Questions

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

  1. 1What is the minimum age for an individual applying for a New Mexico resident insurance producer license?

    1. A. 18
    2. B. 19
    3. C. 21
    4. D. 25

    Answer: A

    Explanation: The controlling text states, "An applicant shall be at least 18 years of age." The rule states that an applicant shall be at least 18 years of age.

    Reference: New Rule — 13.4.2.8

  2. 2An insurer denies a homeowner's application after relying on a consumer report. What must its adverse-action notice identify?

    1. A. The agency that issued the property's building permit
    2. B. The consumer reporting agency that supplied the report
    3. C. The agent who quoted the rejected policy premium
    4. D. The reinsurer that reviewed the applicant's exposure

    Answer: B

    Explanation: "The insurance company must provide you with an adverse action notice that includes the name and contact information of the consumer reporting agency" Because the denial was based on a consumer report, the notice must identify the reporting agency and provide its contact information.

    Reference: CFPB: Insurance consumer reports and adverse action — CFPB Ask CFPB No. 1821, adverse-action paragraph

  3. 3A family deliberately sets aside its own money to pay small, predictable property losses instead of insuring those losses. Which risk-handling method is it using?

    1. A. Retention of the loss exposure through an internal fund
    2. B. Transfer of the loss exposure to an insurer
    3. C. Avoidance of the property activity creating the exposure
    4. D. Sharing of the loss exposure among unrelated households

    Answer: A

    Explanation: "Retention - a mechanism of internal fund allocation for loss exposure" The family funds the exposure internally, matching retention. It has neither transferred, avoided, nor pooled the risk.

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

  4. 4A lender holds a mortgage on a home owned by someone else. The home's destruction would cause the lender a financial loss. What makes the lender's interest insurable?

    1. A. The lender is the property's titled owner
    2. B. The lender can suffer financial loss from damage to the property
    3. C. The lender can occupy the home after a claim
    4. D. The lender wrote the home's insurance policy

    Answer: B

    Explanation: "the insured can suffer a financial loss from damage, loss or destruction to it." The mortgage relationship creates potential financial loss from damage, so the lender can have an insurable interest despite not owning or occupying the home.

    Reference: NAIC Glossary of Insurance Terms — NAIC Glossary, Insurable Interest

  5. 5An investor owns a house rented to another family and seeks property insurance for the structure. Which policy type may be used for this nonowner-occupied residence?

    1. A. A homeowners renter form insuring the investor's own residence
    2. B. An auto policy extending liability to the rental house
    3. C. A dwelling policy insuring a nonowner-occupied residence
    4. D. A personal umbrella policy replacing the building insurance

    Answer: C

    Explanation: "Dwelling policies may be used to cover owner and nonowner-occupied residences" A dwelling policy can insure a residence occupied by someone other than its owner, including this rental; renter, auto, and umbrella coverage serve different risks.

    Reference: NAIC Home Sharing Insurance Review — NAIC Home Sharing Insurance Review, dwelling policies

  6. 6A tenant wants insurance for unscheduled personal belongings in an apartment, rather than insurance on the landlord's building. Which homeowners form fits that need?

    1. A. HO-2 Broad Form for a dwelling owner
    2. B. HO-3 Special Form for an owner-occupied house
    3. C. HO-6 Unit-Owners Form for a condominium owner
    4. D. HO-4 Renter's Form for a tenant's contents

    Answer: D

    Explanation: "HO-4 (Renter’s Form) – Covers unscheduled personal property on a broad named perils basis" HO-4 is the renter form and grants broad named-perils protection to unscheduled contents. The other forms address owner interests.

    Reference: NAIC Homeowners Market Data Call Definitions — NAIC Homeowners Market Data Call Definitions, HO-4

  7. 7How must a New Mexico insured reject uninsured motorist coverage?

    1. A. By oral statement recorded in claim notes
    2. B. In writing
    3. C. By failing to select a deductible
    4. D. By allowing an offer to expire without a written response

    Answer: B

    Explanation: The controlling text states, "required in writing." New Mexico requires rejection of uninsured motorist coverage to be made in writing.

    Reference: 13.12.3 NMAC — 13.12.3.9 NMAC

  8. 8A covered liability suit exceeds the amount available from a homeowner's primary liability policy. Which added policy may pay excess liability and defense costs?

    1. A. A personal umbrella policy above the primary policy
    2. B. A scheduled personal-property endorsement for articles
    3. C. A dwelling fair-rental-value coverage for lost rent
    4. D. An automobile collision coverage for vehicle damage

    Answer: A

    Explanation: "It can also pay for liability and legal defense costs that exceed the amount your primary insurance policy will pay." The umbrella can respond beyond the primary liability policy, including defense costs within its terms. The other products cover property or first-party losses.

    Reference: NAIC What's an Umbrella Policy? — NAIC What's an Umbrella Policy?, excess liability and defense

  9. 9How must a New Mexico resident producer applicant normally file the license application?

    1. A. Electronically, unless the superintendent specifies otherwise
    2. B. Only by certified mail
    3. C. Only in person at an OSI office
    4. D. Through an appointing insurer only

    Answer: A

    Explanation: The controlling text states, "an applicant shall file an application electronically or as otherwise specified by the superintendent." The application must be filed electronically or as otherwise specified by the superintendent.

    Reference: New Rule — 13.4.2.8

  10. 10An individual convicted of a felony involving breach of trust wants to work in insurance affecting interstate commerce. What can permit that participation under 18 U.S.C. § 1033(e)?

    1. A. Oral approval from an appointed insurance producer who supervises the individual's proposed work
    2. B. A certificate of good standing from the court that entered the felony conviction for breach of trust
    3. C. Written consent from an authorized insurance regulator that specifically refers to subsection (e)
    4. D. An internal waiver signed by the insurer's compliance officer for the proposed insurance position

    Answer: C

    Explanation: "the written consent of any insurance regulatory official authorized to regulate the insurer" The exception requires the specified regulator's written consent, specifically referring to subsection (e); approval by the insurer or court is not that consent.

    Reference: 18 U.S.C. § 1033 — 18 U.S.C. § 1033(e)(2)

Topics in this practice bank

These topics describe the available practice for New Mexico Personal Lines 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
    • 18 United States Code (USC) Sections 1033 and 1034 - Purpose
    • Flood Insurance Education (National Flood Insurance Program (NFIP))
  • General Insurance Concepts
    • Risk
    • Risk / Methods of Handling Risk (e.g., Avoidance, Retention, Sharing, Reduction, Transfer)
    • Risk / Elements of Insurable Risks
    • Risk / Definitions (e.g., Risk, Hazard, Peril, Loss)
    • Classifications of Insurers
    • Classifications of Insurers / Mutual, Stock
    • 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 - Definitions
    • Authority and Powers of Producers - Definitions / Express
    • Authority and Powers of Producers - Definitions / Implied
    • Authority and Powers of Producers - Definitions / Apparent
    • Authority and Powers of Producers - Definitions / 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
  • Property and Casualty Insurance Basics
    • Insurable Interest
    • Liability
    • Liability / Absolute
    • Liability / Strict
    • Liability / Vicarious
    • Underwriting (Purpose, Process, Results)
    • Types of Hazards
    • Types of Hazards / Moral
    • Types of Hazards / Morale
    • Types of Hazards / Physical
    • Types of Perils
    • Types of Perils / Named
    • Types of Perils / Open
    • Types of Loss
    • Types of Loss / Direct
    • Types of Loss / Indirect
    • Loss Valuation
    • Loss Valuation / Actual Cash Value
    • Loss Valuation / Replacement Cost
    • Loss Valuation / Market Value
    • Loss Valuation / Agreed Value
    • Loss Valuation / Valued Policy
    • Loss Valuation / Replacement Cost
    • Negligence
    • Negligence / Torts
    • Negligence / Elements of a Negligent Act
    • Negligence / Defense Against Negligence
    • Accident versus Occurrence
    • Policy Structure
    • Policy Structure / Declarations
    • Policy Structure / Definitions
    • Policy Structure / Insuring Agreement
    • Policy Structure / Additional/Supplementary Coverage
    • Policy Structure / Conditions
    • Policy Structure / Exclusions
    • Policy Structure / Endorsements
    • Policy Clauses
    • Policy Clauses / Insureds
    • Policy Clauses / Policy Period
    • Policy Clauses / Policy Territory
    • Policy Clauses / Cancellation and Non-Renewal
    • Policy Clauses / Deductibles
    • Policy Clauses / Other Insurance
    • Policy Clauses / Other Insurance / Nonconcurrency
    • Policy Clauses / Other Insurance / Primary and Excess
    • Policy Clauses / Other Insurance / Pro Rata
    • Policy Clauses / Other Insurance / Contribution by Equal Shares
    • Limits of Liability
    • Limits of Liability / Per Accident
    • Limits of Liability / Per Occurrence
    • Limits of Liability / Per Person
    • Limits of Liability / Aggregate
    • Limits of Liability / Split limits
    • Limits of Liability / Combined Single Limit
    • Coinsurance
    • Coinsurance / Purpose
    • Coinsurance / Definition
    • Coinsurance / Calculation
    • Coinsurance / Penalties
    • Coinsurance / Total versus Partial Loss
    • Specific, Scheduled, and Blanket Insurance
    • Vacant versus Unoccupied
    • Named Insured Provisions
    • Named Insured Provisions / First Named Insured versus Other Insureds
    • Named Insured Provisions / Duties After Loss
    • Named Insured Provisions / Assignment
    • Named Insured Provisions / Waiver of Rights
    • Insurer Provisions
    • Insurer Provisions / Liberalization
    • Insurer Provisions / Subrogation
    • Insurer Provisions / Claim Settlement Options
    • Insurer Provisions / Duty to Defend
    • Third-Party Provisions
    • Third-Party Provisions / Standard Mortgage Clause
    • Third-Party Provisions / Loss Payable Clause
    • Third-Party Provisions / No Benefit to the Bailee
  • Dwelling Policy Concepts
    • Purpose and Eligibility
    • Definitions
    • Perils Insured Against
    • Perils Insured Against / Basic
    • Perils Insured Against / Broad
    • Perils Insured Against / Special
    • Property Coverages
    • Property Coverages / Coverage A - Dwelling
    • Property Coverages / Coverage B - Other Structures
    • Property Coverages / Coverage C - Personal Property
    • Property Coverages / Coverage D - Fair Rental Value
    • Property Coverages / Coverage E - Additional Living Expenses
    • Property Coverages / Other Coverages
    • Personal Liability Supplement
    • Personal Liability Supplement / Coverage L - Personal Liability
    • Personal Liability Supplement / Coverage M - Medical Payments to Others
    • Dwelling Property Conditions
    • Dwelling Property Exclusions
    • Dwelling Policy Endorsements
  • Homeowners Policy Concepts
    • Definitions
    • Eligibility and Purpose
    • Homeowners Policy Coverage Forms
    • Homeowners Policy Coverage Forms / Broad (HO-2)
    • Homeowners Policy Coverage Forms / Special (HO-3)
    • Homeowners Policy Coverage Forms / Contents Broad (HO-4)
    • Homeowners Policy Coverage Forms / Comprehensive (HO-5)
    • Homeowners Policy Coverage Forms / Unit-Owners (HO-6)
    • Homeowners Policy Coverage Forms / Modified Coverages (HO-8)
    • Section I - Property Coverages
    • Section I - Property Coverages / Coverage A - Dwelling
    • Section I - Property Coverages / Coverage B - Other Structures
    • Section I - Property Coverages / Coverage C - Personal Property
    • Section I - Property Coverages / Coverage D - Loss of Use
    • Section I - Property Coverages / Additional Coverages
    • Section II - Liability Coverages
    • Section II - Liability Coverages / Coverage E - Personal Liability
    • Section II - Liability Coverages / Coverage F - Medical Payments to Others
    • Section II - Liability Coverages / Additional Coverages
    • Homeowners Policy Exclusions
    • Homeowners Policy Exclusions / Section I - Property Covered Exclusions
    • Homeowners Policy Exclusions / Section II - Liability Covered Exclusions
    • Homeowners Policy Conditions
    • Homeowners Policy Endorsements
    • Homeowners Policy Endorsements / Business Pursuits
    • Homeowners Policy Endorsements / Earthquake
    • Homeowners Policy Endorsements / Home Day Care
    • Homeowners Policy Endorsements / Personal Injury
    • Homeowners Policy Endorsements / Personal Property Replacement Cost
    • Homeowners Policy Endorsements / Watercraft
    • Scheduled Personal Property/Personal Articles Floater
  • Personal Automobile Policy
    • Definitions
    • Liability Coverage
    • Liability Coverage / Bodily Injury and Property Damage
    • Liability Coverage / Supplementary Payments
    • Liability Coverage / Exclusions
    • Liability Coverage / Liability Extension to Towed Vehicle
    • Medical Payments Coverage
    • Uninsured and Underinsured Motorists Coverage
    • Uninsured and Underinsured Motorists Coverage / Definitions
    • Uninsured and Underinsured Motorists Coverage / Bodily Injury
    • Uninsured and Underinsured Motorists Coverage / UM and UIM Rejection
    • Coverage for Damage to your Automobile
    • Coverage for Damage to your Automobile / Collision
    • Coverage for Damage to your Automobile / Other than Collision (Comprehensive)
    • Coverage for Damage to your Automobile / Deductibles
    • Coverage for Damage to your Automobile / Exclusions
    • Duties after an Accident or Loss
    • General Provisions
    • Endorsements
    • Endorsements / Towing and Labor Costs
    • Endorsements / Extended Non-Owned Coverage - Vehicles Furnished or Available for Regular Use
    • Endorsements / Joint Ownership Coverage
    • Endorsements / Rental Vehicle Coverage
  • Other Types of Personal Insurance
    • Personal Umbrella and Excess Policies
    • Mobile Home Policy (Insuring Agreement)
    • Earthquake Insurance (Insuring Agreement)
    • Earthquake Insurance (Insuring Agreement) / Deductible
    • Flood Insurance
    • Watercraft

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