NEW MEXICO LIFE AND HEALTH INSURANCE
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EXAM ACTUAL EXAM 2026 | ALL --- --- --- --- --- ---
QUESTIONS AND CORRECT ANSWERS | --- --- --- --- ---
VERIFIED ANSWERS | JUST RELEASED --- --- --- --- ---
Complete Exam Bank | New Mexico Office of
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Superintendent of Insurance | Series 18-27 --- --- --- --- --- ---
(Life, Accident & Health) | Rated A+
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SECTION 1: GENERAL INSURANCE CONCEPTS
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(Questions 1– 30) --- --- ---
Question 1: Which of the following best describes the concept of
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-- "Adverse Selection"?
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• A) Insurers selecting only healthy individuals to insure
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• B) A tendency for higher-risk individuals to seek out or
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maintain insurance coverage more than lower-risk
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individuals ---
, • C) The process of an insurer canceling a policy after a claim
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is filed --- ---
• D) The transfer of risk from a large group to a single entity
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Answer: B --- ---
Rationale: Adverse selection is the tendency for persons with a
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higher-than-average likelihood of loss to seek insurance more --- --- --- --- --- --- --- ---
actively than those with lower risk . This can destabilize the risk
--- --- --- --- --- --- --- --- --- --- --- ---
pool because the insurer may collect insufficient premiums to
--- --- --- --- --- --- --- --- ---
cover the claims of the higher-risk group. Underwriting practices
--- --- --- --- --- --- --- --- ---
help insurers protect against adverse selection.
--- --- --- --- --- ---
--
-
Question 2: Under the principle of indemnity, what is the
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purpose of insurance? --- --- ---
• A) To provide a financial profit to the insured in the event of
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-- a loss --- ---
• B) To restore the insured to the same financial condition they
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- were in immediately before the loss
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• C) To punish the party responsible for the loss
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• D) To transfer all risk to the government
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,Answer: B --- ---
Rationale: Indemnity means the insured should be restored to the
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approximate financial position held before the loss, without
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gaining or losing financially from the claim . This principle
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prevents the insured from profiting from insurance and maintains
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insurance as a mechanism for compensation rather than profit.
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--
-
Question 3: What are the essential elements of an insurable
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risk? (Select all that apply)
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• ☐ The loss must be catastrophic
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• ☐ The loss must be definite and measurable
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• ☐ The loss must be accidental and unintentional
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• ☐ The loss must be predictable
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• ☐ The loss must be uninsurable
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, Answer: Definite and measurable, Accidental and
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unintentional, Predictable --- ---
Rationale: An insurable risk typically requires that the loss be
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definite and measurable, accidental and unintentional, and
--- --- --- --- --- --- ---
predictable (so that the insurer can calculate a premium) .
--- --- --- --- --- --- --- --- --- ---
Catastrophic losses are not ideal for private insurers without
--- --- --- --- --- --- --- --- ---
government backing. The loss must also involve a large enough
--- --- --- --- --- --- --- --- --- ---
pool for the law of large numbers to operate.
--- --- --- --- --- --- --- --- ---
--
-
Question 4: A hazard is defined as: --- --- --- --- --- --- ---
• A) The cause of a potential loss
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• B) A condition that increases the chance of loss
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• C) The reduction of risk by transferring it to an insurer
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• D) The actual financial loss suffered
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Answer: B --- ---
Rationale: A hazard is any condition that increases the
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probability or severity of a loss . Hazards can be physical (e.g.,
--- --- --- --- --- --- --- --- --- --- --- ---
faulty wiring), moral (e.g., dishonesty), or morale (e.g.,
--- --- --- --- --- --- --- ---
--- --- --- --- --- ---
EXAM ACTUAL EXAM 2026 | ALL --- --- --- --- --- ---
QUESTIONS AND CORRECT ANSWERS | --- --- --- --- ---
VERIFIED ANSWERS | JUST RELEASED --- --- --- --- ---
Complete Exam Bank | New Mexico Office of
--- --- --- --- --- --- --- ---
Superintendent of Insurance | Series 18-27 --- --- --- --- --- ---
(Life, Accident & Health) | Rated A+
--- --- --- --- --- ---
---
SECTION 1: GENERAL INSURANCE CONCEPTS
--- --- --- --- ---
(Questions 1– 30) --- --- ---
Question 1: Which of the following best describes the concept of
--- --- --- --- --- --- --- --- --- --- -
-- "Adverse Selection"?
--- ---
• A) Insurers selecting only healthy individuals to insure
--- --- --- --- --- --- --- ---
• B) A tendency for higher-risk individuals to seek out or
--- --- --- --- --- --- --- --- --- ---
maintain insurance coverage more than lower-risk
--- --- --- --- --- ---
individuals ---
, • C) The process of an insurer canceling a policy after a claim
--- --- --- --- --- --- --- --- --- --- --- ---
is filed --- ---
• D) The transfer of risk from a large group to a single entity
--- --- --- --- --- --- --- --- --- --- --- --- ---
Answer: B --- ---
Rationale: Adverse selection is the tendency for persons with a
--- --- --- --- --- --- --- --- --- ---
higher-than-average likelihood of loss to seek insurance more --- --- --- --- --- --- --- ---
actively than those with lower risk . This can destabilize the risk
--- --- --- --- --- --- --- --- --- --- --- ---
pool because the insurer may collect insufficient premiums to
--- --- --- --- --- --- --- --- ---
cover the claims of the higher-risk group. Underwriting practices
--- --- --- --- --- --- --- --- ---
help insurers protect against adverse selection.
--- --- --- --- --- ---
--
-
Question 2: Under the principle of indemnity, what is the
--- --- --- --- --- --- --- --- --- ---
purpose of insurance? --- --- ---
• A) To provide a financial profit to the insured in the event of
--- --- --- --- --- --- --- --- --- --- --- --- -
-- a loss --- ---
• B) To restore the insured to the same financial condition they
--- --- --- --- --- --- --- --- --- --- --
- were in immediately before the loss
--- --- --- --- --- ---
• C) To punish the party responsible for the loss
--- --- --- --- --- --- --- --- ---
• D) To transfer all risk to the government
--- --- --- --- --- --- --- ---
,Answer: B --- ---
Rationale: Indemnity means the insured should be restored to the
--- --- --- --- --- --- --- --- --- ---
approximate financial position held before the loss, without
--- --- --- --- --- --- --- ---
gaining or losing financially from the claim . This principle
--- --- --- --- --- --- --- --- --- ---
prevents the insured from profiting from insurance and maintains
--- --- --- --- --- --- --- --- ---
insurance as a mechanism for compensation rather than profit.
--- --- --- --- --- --- --- --- ---
--
-
Question 3: What are the essential elements of an insurable
--- --- --- --- --- --- --- --- --- ---
risk? (Select all that apply)
--- --- --- --- ---
• ☐ The loss must be catastrophic
--- --- --- --- --- ---
• ☐ The loss must be definite and measurable
--- --- --- --- --- --- --- ---
• ☐ The loss must be accidental and unintentional
--- --- --- --- --- --- --- ---
• ☐ The loss must be predictable
--- --- --- --- --- ---
• ☐ The loss must be uninsurable
--- --- --- --- --- ---
, Answer: Definite and measurable, Accidental and
--- --- --- --- --- ---
unintentional, Predictable --- ---
Rationale: An insurable risk typically requires that the loss be
--- --- --- --- --- --- --- --- --- ---
definite and measurable, accidental and unintentional, and
--- --- --- --- --- --- ---
predictable (so that the insurer can calculate a premium) .
--- --- --- --- --- --- --- --- --- ---
Catastrophic losses are not ideal for private insurers without
--- --- --- --- --- --- --- --- ---
government backing. The loss must also involve a large enough
--- --- --- --- --- --- --- --- --- ---
pool for the law of large numbers to operate.
--- --- --- --- --- --- --- --- ---
--
-
Question 4: A hazard is defined as: --- --- --- --- --- --- ---
• A) The cause of a potential loss
--- --- --- --- --- --- ---
• B) A condition that increases the chance of loss
--- --- --- --- --- --- --- --- ---
• C) The reduction of risk by transferring it to an insurer
--- --- --- --- --- --- --- --- --- --- ---
• D) The actual financial loss suffered
--- --- --- --- --- ---
Answer: B --- ---
Rationale: A hazard is any condition that increases the
--- --- --- --- --- --- --- --- ---
probability or severity of a loss . Hazards can be physical (e.g.,
--- --- --- --- --- --- --- --- --- --- --- ---
faulty wiring), moral (e.g., dishonesty), or morale (e.g.,
--- --- --- --- --- --- --- ---
