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New Mexico Life, Health & Accident Exam Practice Questions
Section 1: General Insurance Concepts
1. Which of the following best describes "adverse selection"?
A) Insuring only low-risk individuals
B) Higher-risk individuals seeking insurance more than lower-risk individuals
C) Insurers selecting only healthy applicants
D) State-mandated coverage for all
Answer: B. Adverse selection occurs when those most likely to have losses buy insurance,
potentially causing higher claims than expected .
2. Which of the following is NOT a type of hazard?
A) Physical
B) Moral
C) Morale
D) Indemnity
Answer: D. Indemnity is a principle of insurance, not a type of hazard .
3. The cause of a potential loss, such as fire, windstorm, or death, is known as a(n):
A) Hazard
B) Peril
C) Risk
D) Exposure
Answer: B. A peril is the actual cause of a potential loss. A hazard is a condition that
increases the chance of loss from a peril .
4. A pure risk is defined as:
A) A risk that offers the chance of gain or loss
B) A risk that only offers the chance of loss or no loss
C) A speculative risk
D) A risk that is uninsurable
Answer: B. Pure risks only have a chance of loss or no loss; there is no possibility of gain.
Pure risks are insurable .
5. The law of large numbers enables insurers to:
A) Predict future losses with greater accuracy as the number of exposure units increases
B) Guarantee that no losses will occur
C) Charge each insured an identical premium regardless of risk
D) Avoid paying claims in most circumstances
Answer: A. A large pool of similar exposure units allows insurers to use the law of large
numbers to predict future losses accurately .
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6. Morale hazard is best defined as:
A) An intentional act to cause a loss
B) A careless attitude because the person knows they are insured
C) A physical condition that increases risk
D) A legal restriction on coverage
Answer: B. Morale hazard is a state of mind leading to carelessness because the person
knows they are insured. This differs from moral hazard, which involves intentional
dishonesty .
7. The New Mexico Office of Superintendent of Insurance (OSI) is responsible for:
A) Setting tax rates
B) Licensing, enforcement, and consumer protection for insurance
C) Administering Medicare
D) Regulating banks
Answer: B. The OSI handles licensing, enforcement, market conduct oversight, and
consumer protection under the New Mexico Insurance Code .
8. Which testing vendor administers New Mexico insurance licensing exams?
A) Pearson VUE
B) Prometric
C) PSI Services
D) Kryterion
Answer: C. PSI Services is the exam administrator for New Mexico insurance producer exams
.
9. What is the passing score for the New Mexico Life & Health exam?
A) 65%
B) 70%
C) 75%
D) 80%
Answer: B. The New Mexico bulletin and content outline both state a 70% passing standard .
10. How many items and how much time are allotted for the New Mexico Series 18-27
exam?
A) 120 items in 2 hours
B) 150 items in 2.5 hours
C) 150 items in 3 hours
D) 180 items in 3 hours
Answer: B. The official Series 18-27 content outline states 150 items with a 2.5-hour time
limit .
Section 2: Life Insurance Basics
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11. Which type of life insurance is often used for key person coverage?
A) Term life only
B) Whole life only
C) Universal life only
D) Any type of life insurance
Answer: D. Key person insurance can be any policy type, though term is common due to
lower cost .
12. The "free look" provision in a life insurance policy allows the policyowner to:
A) Change beneficiaries without notice
B) Return the policy for a full refund within a specified period
C) Borrow against cash value
D) Increase coverage without medical exam
Answer: B. Free look gives the policyowner a set number of days to review and return for
refund. New Mexico requires 10 days for life insurance .
13. In a life insurance policy, the "owner" is:
A) The person insured
B) The person who pays premiums and has policy rights
C) The beneficiary
D) The insurer
Answer: B. The policyowner has rights such as naming beneficiaries and taking loans .
14. What is the required free-look period for a life insurance policy in New Mexico?
A) 7 days
B) 10 days
C) 20 days
D) 30 days
Answer: B. New Mexico requires a 10-day free-look period for life insurance policies .
15. Which of the following best describes term life insurance?
A) Permanent coverage with cash value
B) Temporary coverage with no cash value
C) Coverage that builds cash value over time
D) Coverage that never expires
Answer: B. Term insurance is temporary and has no cash value .
16. A life policy that has premiums lower than normal during the early years is called:
A) Modified life
B) Variable life
C) Universal life
D) Endowment
Answer: A. Modified life policies have lower premiums during the early years .
New Mexico Life, Health & Accident Exam Practice Questions
Section 1: General Insurance Concepts
1. Which of the following best describes "adverse selection"?
A) Insuring only low-risk individuals
B) Higher-risk individuals seeking insurance more than lower-risk individuals
C) Insurers selecting only healthy applicants
D) State-mandated coverage for all
Answer: B. Adverse selection occurs when those most likely to have losses buy insurance,
potentially causing higher claims than expected .
2. Which of the following is NOT a type of hazard?
A) Physical
B) Moral
C) Morale
D) Indemnity
Answer: D. Indemnity is a principle of insurance, not a type of hazard .
3. The cause of a potential loss, such as fire, windstorm, or death, is known as a(n):
A) Hazard
B) Peril
C) Risk
D) Exposure
Answer: B. A peril is the actual cause of a potential loss. A hazard is a condition that
increases the chance of loss from a peril .
4. A pure risk is defined as:
A) A risk that offers the chance of gain or loss
B) A risk that only offers the chance of loss or no loss
C) A speculative risk
D) A risk that is uninsurable
Answer: B. Pure risks only have a chance of loss or no loss; there is no possibility of gain.
Pure risks are insurable .
5. The law of large numbers enables insurers to:
A) Predict future losses with greater accuracy as the number of exposure units increases
B) Guarantee that no losses will occur
C) Charge each insured an identical premium regardless of risk
D) Avoid paying claims in most circumstances
Answer: A. A large pool of similar exposure units allows insurers to use the law of large
numbers to predict future losses accurately .
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6. Morale hazard is best defined as:
A) An intentional act to cause a loss
B) A careless attitude because the person knows they are insured
C) A physical condition that increases risk
D) A legal restriction on coverage
Answer: B. Morale hazard is a state of mind leading to carelessness because the person
knows they are insured. This differs from moral hazard, which involves intentional
dishonesty .
7. The New Mexico Office of Superintendent of Insurance (OSI) is responsible for:
A) Setting tax rates
B) Licensing, enforcement, and consumer protection for insurance
C) Administering Medicare
D) Regulating banks
Answer: B. The OSI handles licensing, enforcement, market conduct oversight, and
consumer protection under the New Mexico Insurance Code .
8. Which testing vendor administers New Mexico insurance licensing exams?
A) Pearson VUE
B) Prometric
C) PSI Services
D) Kryterion
Answer: C. PSI Services is the exam administrator for New Mexico insurance producer exams
.
9. What is the passing score for the New Mexico Life & Health exam?
A) 65%
B) 70%
C) 75%
D) 80%
Answer: B. The New Mexico bulletin and content outline both state a 70% passing standard .
10. How many items and how much time are allotted for the New Mexico Series 18-27
exam?
A) 120 items in 2 hours
B) 150 items in 2.5 hours
C) 150 items in 3 hours
D) 180 items in 3 hours
Answer: B. The official Series 18-27 content outline states 150 items with a 2.5-hour time
limit .
Section 2: Life Insurance Basics
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11. Which type of life insurance is often used for key person coverage?
A) Term life only
B) Whole life only
C) Universal life only
D) Any type of life insurance
Answer: D. Key person insurance can be any policy type, though term is common due to
lower cost .
12. The "free look" provision in a life insurance policy allows the policyowner to:
A) Change beneficiaries without notice
B) Return the policy for a full refund within a specified period
C) Borrow against cash value
D) Increase coverage without medical exam
Answer: B. Free look gives the policyowner a set number of days to review and return for
refund. New Mexico requires 10 days for life insurance .
13. In a life insurance policy, the "owner" is:
A) The person insured
B) The person who pays premiums and has policy rights
C) The beneficiary
D) The insurer
Answer: B. The policyowner has rights such as naming beneficiaries and taking loans .
14. What is the required free-look period for a life insurance policy in New Mexico?
A) 7 days
B) 10 days
C) 20 days
D) 30 days
Answer: B. New Mexico requires a 10-day free-look period for life insurance policies .
15. Which of the following best describes term life insurance?
A) Permanent coverage with cash value
B) Temporary coverage with no cash value
C) Coverage that builds cash value over time
D) Coverage that never expires
Answer: B. Term insurance is temporary and has no cash value .
16. A life policy that has premiums lower than normal during the early years is called:
A) Modified life
B) Variable life
C) Universal life
D) Endowment
Answer: A. Modified life policies have lower premiums during the early years .
