NEW MEXICO LIFE AND
HEALTH INSURANCE PRACTICE
EXAM - NEW MEXICO LIFE AND
HEALTH INSURANCE PRACTICE
EXAM
1. The primary purpose of life insurance is to:
A. Provide investment income only
B. Pay a death benefit to beneficiaries
C. Avoid taxes
D. Replace health insurance
Correct Answer: B
Rationale: Life insurance is designed to provide financial protection
to beneficiaries upon the insured’s death.
2. Term life insurance provides coverage for:
A. The insured’s entire life
B. A specified period of time
C. Only accidental death
,D. Retirement
Correct Answer: B
Rationale: Term policies provide protection for a defined term (e.g.,
10, 20, 30 years).
3. Whole life insurance is characterized by:
A. Temporary coverage
B. Lifetime coverage with cash value
C. No premiums
D. Variable interest rates only
Correct Answer: B
Rationale: Whole life offers permanent protection and builds cash
value over time.
4. The cash value of a policy:
A. Is paid only at death
B. Accumulates tax-deferred
C. Is fixed by law
D. Cannot be accessed
,Correct Answer: B
Rationale: Cash value grows tax-deferred and may be borrowed or
withdrawn under policy terms.
5. A beneficiary is:
A. The policy owner
B. The insurer
C. The person receiving policy proceeds
D. The agent
Correct Answer: C
Rationale: The beneficiary receives the death benefit when the insured
dies.
6. The policy owner has the right to:
A. Change beneficiaries
B. Assign the policy
C. Borrow against cash value
D. All of the above
Correct Answer: D
Rationale: Ownership rights include control over policy features and
benefits.
, 7. Premiums are determined by:
A. Age, health, and risk factors
B. Beneficiary income
C. Agent commission
D. State taxes
Correct Answer: A
Rationale: Underwriting evaluates risk factors to set premiums.
8. Underwriting is the process of:
A. Selling policies
B. Evaluating risk
C. Paying claims
D. Marketing insurance
Correct Answer: B
Rationale: Insurers assess risk before issuing a policy.
9. A medical exam may be required to:
A. Verify age only
HEALTH INSURANCE PRACTICE
EXAM - NEW MEXICO LIFE AND
HEALTH INSURANCE PRACTICE
EXAM
1. The primary purpose of life insurance is to:
A. Provide investment income only
B. Pay a death benefit to beneficiaries
C. Avoid taxes
D. Replace health insurance
Correct Answer: B
Rationale: Life insurance is designed to provide financial protection
to beneficiaries upon the insured’s death.
2. Term life insurance provides coverage for:
A. The insured’s entire life
B. A specified period of time
C. Only accidental death
,D. Retirement
Correct Answer: B
Rationale: Term policies provide protection for a defined term (e.g.,
10, 20, 30 years).
3. Whole life insurance is characterized by:
A. Temporary coverage
B. Lifetime coverage with cash value
C. No premiums
D. Variable interest rates only
Correct Answer: B
Rationale: Whole life offers permanent protection and builds cash
value over time.
4. The cash value of a policy:
A. Is paid only at death
B. Accumulates tax-deferred
C. Is fixed by law
D. Cannot be accessed
,Correct Answer: B
Rationale: Cash value grows tax-deferred and may be borrowed or
withdrawn under policy terms.
5. A beneficiary is:
A. The policy owner
B. The insurer
C. The person receiving policy proceeds
D. The agent
Correct Answer: C
Rationale: The beneficiary receives the death benefit when the insured
dies.
6. The policy owner has the right to:
A. Change beneficiaries
B. Assign the policy
C. Borrow against cash value
D. All of the above
Correct Answer: D
Rationale: Ownership rights include control over policy features and
benefits.
, 7. Premiums are determined by:
A. Age, health, and risk factors
B. Beneficiary income
C. Agent commission
D. State taxes
Correct Answer: A
Rationale: Underwriting evaluates risk factors to set premiums.
8. Underwriting is the process of:
A. Selling policies
B. Evaluating risk
C. Paying claims
D. Marketing insurance
Correct Answer: B
Rationale: Insurers assess risk before issuing a policy.
9. A medical exam may be required to:
A. Verify age only
