NM LIFE ONLINE PRE-LICENSING EXAM WITH
PRECISE DETAILED ANSWERS
Upon the death of the insured, the primary beneficiary discovers that the insured chose the
interest only settlement option. What does this mean?
1
The primary beneficiary will receive the death benefit and the secondary beneficiaries will
share the interest payments.
2
The beneficiary will receive the lump sum, plus interest.
3
The beneficiary must pay interest to the insurer.
4
The beneficiary will only receive payments of the interest earned on the death benefit. -
correct answer✔✔4. The beneficiary will only receive payments of the interest earned on
the death benefit.
Courts will interpret any ambiguity in an insurance contract
1
Through arbitration.
2
In favor of the insured.
3
In favor of the insurer.
4
Based on the prudent person rule. - correct answer✔✔2. In favor of the insured.
,Which of the following stipulates that life insurance premiums can be paid in advance of
policy issuance?
1
Prepayment clause
2
Policy issuance clause
3
Payment of premium clause
4
Grace period provision - correct answer✔✔3. Payment of premium clause
An agent selling variable annuities must be registered with
1
FINRA.
2
Department of Insurance.
3
The Guaranty Association.
4
SEC. - correct answer✔✔1. FINRA.
Which of the following would apply if an agent knows that an applicant is going to cash in
an old policy and use the funds to purchase new insurance?
1
Conversion
,2
Lapse
3
Replacement
4
Reinstatement - correct answer✔✔3. Replacement
In the underwriting process, it was determined that the applicant for life insurance is in
poor health and has some dangerous habits. Which of the following is true concerning the
policy premium?
1
It will likely be lower because the applicant is a preferred risk.
2
It will likely be higher because the applicant is a substandard risk.
3
It will likely be the average premium issued to standard risks.
4
The applicant's habits and health do not affect the premiums. - correct answer✔✔2. It will
likely be higher because the applicant is a substandard risk.
If a policy has an automatic premium loan provision, what happens if the insured dies
before the loan is paid back?
1
The policy beneficiary receives the full death benefit.
2
The balance of the loan will be taken out of the death benefit.
3
, The policy is rendered null and void.
4
The policy beneficiary takes over the loan payments. - correct answer✔✔2. The balance of
the loan will be taken out of the death benefit.
Under an extended term nonforfeiture option, the policy cash value is converted to
1
The same face amount as in the whole life policy.
2
The face amount equal to the cash value.
3
A higher face amount than the whole life policy.
4
A lower face amount than the whole life policy. - correct answer✔✔1. The same face
amount as in the whole life policy.
Which of the following is NOT a characteristic of an insurable risk?
1
The loss must be catastrophic.
2
The loss must be due to chance.
3
The loss exposure must be large.
4
The loss must be measurable. - correct answer✔✔1. The loss must be catastrophic.
PRECISE DETAILED ANSWERS
Upon the death of the insured, the primary beneficiary discovers that the insured chose the
interest only settlement option. What does this mean?
1
The primary beneficiary will receive the death benefit and the secondary beneficiaries will
share the interest payments.
2
The beneficiary will receive the lump sum, plus interest.
3
The beneficiary must pay interest to the insurer.
4
The beneficiary will only receive payments of the interest earned on the death benefit. -
correct answer✔✔4. The beneficiary will only receive payments of the interest earned on
the death benefit.
Courts will interpret any ambiguity in an insurance contract
1
Through arbitration.
2
In favor of the insured.
3
In favor of the insurer.
4
Based on the prudent person rule. - correct answer✔✔2. In favor of the insured.
,Which of the following stipulates that life insurance premiums can be paid in advance of
policy issuance?
1
Prepayment clause
2
Policy issuance clause
3
Payment of premium clause
4
Grace period provision - correct answer✔✔3. Payment of premium clause
An agent selling variable annuities must be registered with
1
FINRA.
2
Department of Insurance.
3
The Guaranty Association.
4
SEC. - correct answer✔✔1. FINRA.
Which of the following would apply if an agent knows that an applicant is going to cash in
an old policy and use the funds to purchase new insurance?
1
Conversion
,2
Lapse
3
Replacement
4
Reinstatement - correct answer✔✔3. Replacement
In the underwriting process, it was determined that the applicant for life insurance is in
poor health and has some dangerous habits. Which of the following is true concerning the
policy premium?
1
It will likely be lower because the applicant is a preferred risk.
2
It will likely be higher because the applicant is a substandard risk.
3
It will likely be the average premium issued to standard risks.
4
The applicant's habits and health do not affect the premiums. - correct answer✔✔2. It will
likely be higher because the applicant is a substandard risk.
If a policy has an automatic premium loan provision, what happens if the insured dies
before the loan is paid back?
1
The policy beneficiary receives the full death benefit.
2
The balance of the loan will be taken out of the death benefit.
3
, The policy is rendered null and void.
4
The policy beneficiary takes over the loan payments. - correct answer✔✔2. The balance of
the loan will be taken out of the death benefit.
Under an extended term nonforfeiture option, the policy cash value is converted to
1
The same face amount as in the whole life policy.
2
The face amount equal to the cash value.
3
A higher face amount than the whole life policy.
4
A lower face amount than the whole life policy. - correct answer✔✔1. The same face
amount as in the whole life policy.
Which of the following is NOT a characteristic of an insurable risk?
1
The loss must be catastrophic.
2
The loss must be due to chance.
3
The loss exposure must be large.
4
The loss must be measurable. - correct answer✔✔1. The loss must be catastrophic.
