New Mexico Life, Health, Accident
Actual Exam Questions And Answers
Practice Questions with Solutions
Newest | Already Graded A+
1. Which type of life insurance policy is best described as offering
both a death benefit and a cash value that grows based on the
insurer’s investment experience?
A. Term life
B. Whole life
C. Variable life
D. Universal life
✅ Correct Answer: C – Variable life
Rationale: Variable life insurance has a death benefit and cash
value that fluctuate based on the performance of separate
accounts (sub-accounts) chosen by the policyowner. Term life (A)
has no cash value. Whole life (B) has guaranteed cash value
growth. Universal life (D) has flexible premiums and an interest-
sensitive cash value, but it is not directly tied to investment sub-
accounts.
,2. The ownership clause in a life insurance policy grants which
rights to the policyowner?
A. Only the right to name a beneficiary
B. All ownership rights, including changing the beneficiary and
assigning the policy
C. Only the right to pay premiums
D. No rights until the insured dies
✅ Correct Answer: B – All ownership rights, including
changing the beneficiary and assigning the policy
Rationale: The ownership clause states that the policyowner (not
necessarily the insured) possesses all contractual rights:
naming/changing beneficiaries, assigning the policy, taking loans,
surrendering for cash, etc.
3. Under a life insurance policy, if the beneficiary and the insured
die in a common accident and there is insufficient evidence to
show who died first, which of the following applies under the
Uniform Simultaneous Death Act?
A. The insured is presumed to have died first
B. The beneficiary is presumed to have died first
C. The policy proceeds go to the contingent beneficiary
D. Both B and C
✅ Correct Answer: D – Both B and C
Rationale: The Uniform Simultaneous Death Act presumes the
beneficiary died first, so the proceeds pass to the contingent
beneficiary (or the insured’s estate if no contingent beneficiary
,exists). This avoids the proceeds being included in the
beneficiary’s estate.
4. What is the grace period commonly found in life insurance
policies?
A. 10 days
B. 30 days
C. 31 days
D. 60 days
✅ Correct Answer: C – 31 days (most common; New Mexico
law mandates at least 30 days)
Rationale: Most life insurance policies provide a 31-day grace
period for paying premiums after the due date. If the insured dies
during the grace period, the premium due is deducted from the
death benefit.
5. The provision that prevents an insurer from contesting a life
insurance policy after it has been in force for two years (except for
nonpayment of premiums) is called the:
A. Incontestability clause
B. Reinstatement clause
C. Misstatement of age clause
D. Entire contract clause
, ✅ Correct Answer: A – Incontestability clause
Rationale: After two years, the insurer cannot void the policy or
deny a claim based on misstatements in the application (except
for fraud in some states). It does not apply to nonpayment of
premiums.
6. Which dividend option in a participating life insurance policy
uses the dividend to purchase additional whole life insurance
without evidence of insurability?
A. Cash payment
B. Reduction of premium
C. Paid-up additions
D. Accumulation at interest
✅ Correct Answer: C – Paid-up additions
Rationale: Paid-up additions use the dividend to buy small
amounts of fully paid-up whole life insurance. The additions
increase both the death benefit and cash value without requiring
proof of insurability.
7. An insured owns
a 100,000wholelifepolicywitha100,000wholelifepolicywitha20,000 loan
outstanding. If the insured dies, the beneficiary receives:
A. 100,000B.100,000B.80,000
C. 20,000D.20,000D.120,000
Actual Exam Questions And Answers
Practice Questions with Solutions
Newest | Already Graded A+
1. Which type of life insurance policy is best described as offering
both a death benefit and a cash value that grows based on the
insurer’s investment experience?
A. Term life
B. Whole life
C. Variable life
D. Universal life
✅ Correct Answer: C – Variable life
Rationale: Variable life insurance has a death benefit and cash
value that fluctuate based on the performance of separate
accounts (sub-accounts) chosen by the policyowner. Term life (A)
has no cash value. Whole life (B) has guaranteed cash value
growth. Universal life (D) has flexible premiums and an interest-
sensitive cash value, but it is not directly tied to investment sub-
accounts.
,2. The ownership clause in a life insurance policy grants which
rights to the policyowner?
A. Only the right to name a beneficiary
B. All ownership rights, including changing the beneficiary and
assigning the policy
C. Only the right to pay premiums
D. No rights until the insured dies
✅ Correct Answer: B – All ownership rights, including
changing the beneficiary and assigning the policy
Rationale: The ownership clause states that the policyowner (not
necessarily the insured) possesses all contractual rights:
naming/changing beneficiaries, assigning the policy, taking loans,
surrendering for cash, etc.
3. Under a life insurance policy, if the beneficiary and the insured
die in a common accident and there is insufficient evidence to
show who died first, which of the following applies under the
Uniform Simultaneous Death Act?
A. The insured is presumed to have died first
B. The beneficiary is presumed to have died first
C. The policy proceeds go to the contingent beneficiary
D. Both B and C
✅ Correct Answer: D – Both B and C
Rationale: The Uniform Simultaneous Death Act presumes the
beneficiary died first, so the proceeds pass to the contingent
beneficiary (or the insured’s estate if no contingent beneficiary
,exists). This avoids the proceeds being included in the
beneficiary’s estate.
4. What is the grace period commonly found in life insurance
policies?
A. 10 days
B. 30 days
C. 31 days
D. 60 days
✅ Correct Answer: C – 31 days (most common; New Mexico
law mandates at least 30 days)
Rationale: Most life insurance policies provide a 31-day grace
period for paying premiums after the due date. If the insured dies
during the grace period, the premium due is deducted from the
death benefit.
5. The provision that prevents an insurer from contesting a life
insurance policy after it has been in force for two years (except for
nonpayment of premiums) is called the:
A. Incontestability clause
B. Reinstatement clause
C. Misstatement of age clause
D. Entire contract clause
, ✅ Correct Answer: A – Incontestability clause
Rationale: After two years, the insurer cannot void the policy or
deny a claim based on misstatements in the application (except
for fraud in some states). It does not apply to nonpayment of
premiums.
6. Which dividend option in a participating life insurance policy
uses the dividend to purchase additional whole life insurance
without evidence of insurability?
A. Cash payment
B. Reduction of premium
C. Paid-up additions
D. Accumulation at interest
✅ Correct Answer: C – Paid-up additions
Rationale: Paid-up additions use the dividend to buy small
amounts of fully paid-up whole life insurance. The additions
increase both the death benefit and cash value without requiring
proof of insurability.
7. An insured owns
a 100,000wholelifepolicywitha100,000wholelifepolicywitha20,000 loan
outstanding. If the insured dies, the beneficiary receives:
A. 100,000B.100,000B.80,000
C. 20,000D.20,000D.120,000
