NM L&H Exam Flashcards

Q: What is the format and cost of the New Mexico Series 18-27 exam?

The New Mexico Life, Accident & Health producer exam (Series 18-27) is administered by PSI for the OSI. It contains 150 items, allows 2 hours and 30 minutes, requires a 70% passing score, and charges a $75 fee per attempt. There is no mandatory prelicensing education requirement.

Q: What is New Mexico's retake rule under NMSA 59A-11-6(E)?

A candidate may attempt a line-of-authority exam up to four times. After the fourth unsuccessful attempt, a six-month waiting period applies before the candidate can register for that exam again. Each attempt requires a new $75 exam fee.

Q: Which New Mexico statutes cover unfair trade practices tested on the exam?

The NMSA 59A-16 series governs unfair trade practices. Key sections include 59A-16-6 (twisting), 59A-16-10 (defamation), 59A-16-16 through 59A-16-18 (anti-rebating), and 59A-16-27 (cease-and-desist). Producer fiduciary obligations appear at 59A-12-22.

Q: What is the New Mexico Life and Health Insurance Guaranty Association?

The Guaranty Association is a statutory safety net that pays covered claims when a member insurer becomes insolvent, subject to statutory limits and conditions. Producers are prohibited from using guaranty coverage as a sales inducement.

Q: When do New Mexico producer licenses renew and what happens if CE is late?

New Mexico producer licenses renew biennially on the last day of the producer's birth month. CE credits cannot be carried over to the next cycle, and late CE carries a $50 penalty. The same course may not be repeated for credit within 36 months.

Question 1

Office of Superintendent of Insurance (OSI)

Accepted Answer

New Mexico's independent insurance regulator. OSI licenses producers, enforces the Insurance Code, conducts market conduct oversight, and protects consumers. It is the body that issues your producer license, not the testing vendor PSI.

Question 2

NMSA Chapter 59A

Accepted Answer

The New Mexico Insurance Code chapter where licensing, trade practice, and insurer regulation statutes live. Citations such as 59A-11-6 (examinations) and 59A-16-6 (twisting) appear on the state-law portion of Series 18-27.

Question 3

Series 18-27 exam format

Accepted Answer

New Mexico's combined Life, Accident & Health producer exam. 150 items, 2.5-hour time limit, 70% passing score, $75 fee per attempt. Items blend national content with New Mexico-specific statutes.

Question 4

NMSA 59A-11-6(E) retake rule

Accepted Answer

After four unsuccessful attempts at the same line of authority, a candidate must wait six months before retesting. Attempts 1-4 may be rescheduled with a new exam fee; the six-month wait triggers only after the fourth failure.

Question 5

PSI Services (NMINS portal)

Accepted Answer

The vendor that administers New Mexico insurance exams under OSI contract. Scheduling is via PSI's NMINS portal; the $75 exam fee is paid to PSI and is separate from the NIPR license application fee.

Question 6

Resident producer place-of-business rule

Accepted Answer

NMAC 13.4.2.26 requires resident producers to maintain an in-state place of business accessible to the public. Nonresidents satisfy this through their home-state office and reciprocity, not by opening a New Mexico office.

Question 7

20-day change-of-information rule

Accepted Answer

A producer must report a legal name or address change to OSI within 20 days. Missing the deadline can trigger a monetary penalty and create compliance exposure under NMAC 13.4.2.26.

Question 8

Prelicensing education in New Mexico

Accepted Answer

New Mexico does NOT require a prelicensing course for life and health applicants. Self-study is allowed, but structured prep is strongly recommended because the exam blends national content with state-specific statutes you must memorize.

Question 9

24-hour CE rule

Accepted Answer

Most resident producers complete 24 CE credits per two-year compliance period, split as 21 general + 3 ethics. CE cannot be carried over, and the same course may not be repeated for credit within 36 months.

Question 10

Annuity suitability training

Accepted Answer

Before soliciting annuities in New Mexico, a producer must complete a one-time 4-hour annuity suitability course. It supports the best-interest standard for recommending annuity products to consumers.

Question 11

Long-term care training

Accepted Answer

LTC transactions require an 8-hour initial course before sale and a 4-hour refresher each compliance period. This is in addition to the standard 24-hour CE baseline when applicable.

Question 12

Biennial renewal timing

Accepted Answer

New Mexico producer licenses renew on the last day of the producer's birth month, every two years. Late CE carries a $50 penalty, and credits cannot be carried into the next cycle.

Question 13

Twisting (NMSA 59A-16-6)

Accepted Answer

Inducing a policyholder to replace existing coverage through misleading comparisons or misrepresentation. New Mexico specifically targets it at NMSA 59A-16-6 and tests it as a frequent producer-conduct point.

Question 14

Defamation (NMSA 59A-16-10)

Accepted Answer

Making false, malicious, or derogatory statements about an insurer or producer. It sits within New Mexico's unfair trade practice statutes, separate from twisting and rebating.

Question 15

Anti-rebating (NMSA 59A-16-16 to 59A-16-18)

Accepted Answer

New Mexico bars producers from offering unfiled inducements, special favors, or rebates of premium to persuade a sale. Legitimate policy dividends and policy provisions are not rebating.

Question 16

Cease-and-desist (NMSA 59A-16-27)

Accepted Answer

An OSI order requiring a person to stop a specified prohibited act. Violating an issued cease-and-desist exposes the producer to further enforcement action and monetary penalties.

Question 17

Producer fiduciary duty (NMSA 59A-12-22)

Accepted Answer

Producers handling premium funds act in a fiduciary capacity: premiums collected for an insurer must be remitted promptly and not commingled with personal funds. Misuse triggers discipline and restitution.

Question 18

Life & Health Insurance Guaranty Association

Accepted Answer

A statutory safety net paying covered claims when a member insurer becomes insolvent, subject to statutory limits and conditions. Producers may NOT use guaranty coverage as a sales inducement.

Question 19

Risk transfer

Accepted Answer

The core purpose of insurance — shifting the financial consequences of a loss from the policyholder to the insurer. Insurance does not eliminate risk; it converts uncertain large losses into predictable premium payments.

Question 20

Law of large numbers

Accepted Answer

As the number of exposure units grows, actual results more closely match predicted results. This is the statistical basis that lets insurers price premiums from loss predictions.

Question 21

Insurable risk requirements

Accepted Answer

A risk must be due to chance, definite and measurable, statistically predictable, non-catastrophic to the pool, and the insured must have an insurable interest. A guaranteed profit for the insurer is NOT a requirement.

Question 22

Mutual vs. stock insurer

Accepted Answer

A mutual insurer is owned by its policyholders, who may receive dividends from surplus. A stock insurer is owned by shareholders who may or may not be policyholders and whose primary goal is profit for investors.

Question 23

Reciprocal exchange and attorney-in-fact

Accepted Answer

A reciprocal exchange is an unincorporated group where subscribers insure each other. An attorney-in-fact manages the daily operations — premiums, claims, and underwriting — on the subscribers' behalf.

Question 24

Insurable interest in life insurance

Accepted Answer

For life insurance, insurable interest must exist at the time of application only — not at the time of loss. This differs from property insurance, which requires insurable interest at both application and loss.

Question 25

Fraternal benefit societies

Accepted Answer

Nonprofit fraternal organizations that provide insurance to members through a lodge system. They are exempt from federal income tax and operate for the benefit of members, not for profit.

Question 26

Contract of adhesion

Accepted Answer

An insurance policy is drafted solely by the insurer with no negotiation. Because the insured has no chance to negotiate terms, any ambiguity in the language is interpreted in favor of the insured.

Question 27

Unilateral contract

Accepted Answer

Only the insurer makes a legally enforceable promise — to pay covered claims. The insured has no legal duty to keep paying premiums; if they stop, the policy simply lapses.

Question 28

Aleatory contract

Accepted Answer

The values exchanged may be unequal — a small premium can trigger a large death benefit, or many premiums can result in no claim. This is acceptable because the outcome depends on chance.

Question 29

Utmost good faith (uberrimae fidei)

Accepted Answer

Both insurer and insured must deal honestly and disclose material facts. The insured's duty is reinforced by the incontestable clause and the application's representations about health and history.

Question 30

Insuring agreement

Accepted Answer

The heart of the policy that contains the insurer's promise to pay benefits — stating what is paid, to whom, and under what circumstances. Declarations, conditions, and exclusions modify or limit this promise.

Question 31

Grace period vs. reinstatement

Accepted Answer

The grace period lets a late premium be paid without losing coverage (commonly 30 or 31 days for life). Reinstatement revives a policy that has already lapsed, usually requiring evidence of insurability and overdue premiums.

Question 32

Annuity accumulation vs. annuitization

Accepted Answer

Accumulation is the funding and growth phase where the contract builds value. Annuitization converts that value into a stream of income payments — the contract's payout phase.

Question 33

Immediate vs. deferred annuity

Accepted Answer

An immediate annuity starts income payments within about one year of purchase. A deferred annuity builds value first and pays later, often years or decades downstream.

Question 34

Annuitant vs. owner

Accepted Answer

The annuitant is the person whose life expectancy sets the income payment size and duration. The owner holds contract rights — naming beneficiaries, taking withdrawals, surrendering — and may or may not be the annuitant.

Question 35

Fixed vs. variable annuity

Accepted Answer

A fixed annuity is backed by the insurer's general account and guarantees a minimum interest rate. A variable annuity uses a separate account where investment risk is borne by the contract owner, not the insurer.

Question 36

Modified Endowment Contract (MEC)

Accepted Answer

A life policy that fails the 7-pay test becomes a MEC. Distributions are taxed gain-first and may trigger a 10% additional tax before age 59½, making MEC status a major suitability red flag.

Question 37

Nonqualified annuity taxation

Accepted Answer

Withdrawals from a nonqualified annuity are taxed gain-first (LIFO), while annuitized payments use an exclusion ratio to recover basis pro rata. The distinction drives payout-strategy recommendations.

Question 38

Probationary vs. elimination period

Accepted Answer

A probationary period delays coverage at policy start for specified conditions. An elimination period is the waiting time after a disability begins before benefits are paid — they operate at different points of the claim lifecycle.

Question 39

Own occupation vs. any occupation disability

Accepted Answer

Own-occupation pays if the insured cannot perform their own occupation. Any-occupation pays only if they cannot perform any suitable occupation. Any-occ is stricter and usually cheaper.

Question 40

Proof of loss (90 days)

Accepted Answer

Under mandatory health provisions, the insured must submit formal proof of loss within 90 days of the loss. The window can be extended up to one year if the insured is legally incapacitated.

Question 41

Subrogation in health insurance

Accepted Answer

The insurer steps into the insured's shoes to recover claim payments from a third party who caused the loss. It prevents double recovery and keeps premiums aligned with actual responsibility.

Question 42

Coordination of benefits — Birthday Rule

Accepted Answer

For a dependent child covered by both parents' plans, the plan of the parent whose birthday falls earlier in the calendar year is primary. Year of birth is irrelevant; month and day control.

Question 43

Six activities of daily living (ADLs)

Accepted Answer

Bathing, dressing, eating, toileting, transferring, and continence. LTC benefit triggers commonly require inability to perform 2 of the 6, or severe cognitive impairment.

Question 44

Non-cancellable vs. guaranteed renewable

Accepted Answer

A non-cancellable policy locks premiums and renewal through age 65 (or a stated age). A guaranteed renewable policy must be renewed but allows the insurer to raise premiums by class.

Question 45

LTC benefit triggers

Accepted Answer

Long-term care eligibility is commonly tied to impairment in 2 of the 6 ADLs or severe cognitive impairment. The trigger determines when benefit payments actually start, not the policy's issue date.

Question 46

Combination life/LTC product

Accepted Answer

A life policy with an LTC rider lets the insured access the death benefit for qualified long-term care. Any unused benefit still pays to beneficiaries, removing the use-it-or-lose-it concern of standalone LTC.

Question 47

Social Security disability waiting period

Accepted Answer

Social Security Disability Insurance imposes a federal five-month waiting period after the established onset of disability before benefits begin. The outline tests this as benefit-commencement timing, not as a state law.

Question 48

Medicare Parts A, B, and D

Accepted Answer

Part A covers hospital inpatient care. Part B covers physician and outpatient services. Part D covers prescription drugs. Medigap supplements Original Medicare by filling specified cost-sharing gaps.

Question 49

Medicaid vs. Medicare

Accepted Answer

Medicaid is a means-tested public program for eligible low-income individuals. Medicare is primarily age-based (65+) or disability-based. They are separate programs with different eligibility rules despite similar names.

Question 50

COBRA continuation periods

Accepted Answer

Qualifying beneficiaries who lose coverage due to termination of employment or reduced hours can continue group health coverage for 18 months. Other qualifying events (death, divorce, Medicare entitlement, loss of dependent status) trigger a 36-month continuation period.

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