New Mexico Life and Health Insurance
Practice Exam QUESTIONS AND
CORRECT ANSWERS (VERIFIED
ANSWERS) PLUS RATIONALES 2025
1. What is the primary purpose of life insurance?
• To create savings
• To pay medical bills
• To provide financial protection to dependents after death
• To avoid taxes
Life insurance provides financial protection and income replacement for
beneficiaries after the insured’s death.
2. A life insurance policy’s consideration clause states:
• The premium paid and the application are the consideration
• That the insurer guarantees insurability
• That the policy is renewable
,• That the insurer pays death claims
Consideration is the exchange of value – the insured’s premiums and
representations in the application.
3. What does the term “insurable interest” mean?
• A legitimate financial or emotional interest in the person being insured
• A person who is interested in buying insurance
• An interest in stocks and bonds
• A life expectancy greater than 10 years
Insurable interest ensures that the policyowner benefits financially or
emotionally from the insured’s survival.
4. In New Mexico, how long is the free-look period for life insurance?
• 10 days
• 10 days from policy delivery
• 15 days from signing
• 20 days
The free-look period allows the policyholder to review and cancel the
policy within 10 days for a full refund.
5. Which of the following is a type of term life insurance?
• Level term
• Whole life
• Universal life
, • Variable life
Level term offers fixed premiums and a level death benefit for a specified
term.
6. Which rider allows the insured to purchase additional coverage at future
dates without proof of insurability?
• Waiver of Premium Rider
• Accidental Death Rider
• Guaranteed Insurability Rider
• Cost of Living Rider
This rider guarantees the right to buy more insurance at specific times or
life events.
7. Which life insurance policy accumulates cash value and has flexible
premiums?
• Term life
• Whole life
• Universal life
• Group life
Universal life offers flexibility with premium payments and death benefits
while building cash value.
8. What does the incontestability clause do?
• Prevents the insurer from voiding the policy after two years for
misstatements
Practice Exam QUESTIONS AND
CORRECT ANSWERS (VERIFIED
ANSWERS) PLUS RATIONALES 2025
1. What is the primary purpose of life insurance?
• To create savings
• To pay medical bills
• To provide financial protection to dependents after death
• To avoid taxes
Life insurance provides financial protection and income replacement for
beneficiaries after the insured’s death.
2. A life insurance policy’s consideration clause states:
• The premium paid and the application are the consideration
• That the insurer guarantees insurability
• That the policy is renewable
,• That the insurer pays death claims
Consideration is the exchange of value – the insured’s premiums and
representations in the application.
3. What does the term “insurable interest” mean?
• A legitimate financial or emotional interest in the person being insured
• A person who is interested in buying insurance
• An interest in stocks and bonds
• A life expectancy greater than 10 years
Insurable interest ensures that the policyowner benefits financially or
emotionally from the insured’s survival.
4. In New Mexico, how long is the free-look period for life insurance?
• 10 days
• 10 days from policy delivery
• 15 days from signing
• 20 days
The free-look period allows the policyholder to review and cancel the
policy within 10 days for a full refund.
5. Which of the following is a type of term life insurance?
• Level term
• Whole life
• Universal life
, • Variable life
Level term offers fixed premiums and a level death benefit for a specified
term.
6. Which rider allows the insured to purchase additional coverage at future
dates without proof of insurability?
• Waiver of Premium Rider
• Accidental Death Rider
• Guaranteed Insurability Rider
• Cost of Living Rider
This rider guarantees the right to buy more insurance at specific times or
life events.
7. Which life insurance policy accumulates cash value and has flexible
premiums?
• Term life
• Whole life
• Universal life
• Group life
Universal life offers flexibility with premium payments and death benefits
while building cash value.
8. What does the incontestability clause do?
• Prevents the insurer from voiding the policy after two years for
misstatements
