17 Free New Mexico Life & Health Practice Questions: Annuities and Accident & Health Policy Provisions (2026)
How to Use This Annuities and Health Provisions Set
Annuities are 8% of the exam (12 scored items) and Accident and Health Insurance Policy Provisions are 7% (10 items), so 22 of the 150 scored items, about 15%, sit in this set. Chapter 6 of the LanePrep course covers both.
The two topics share a set because both reward exact definitions. An annuity is described by when it starts, how it is funded and how it pays out, and a health policy by its required and optional clauses and the deadlines inside them. These 17 questions come from LanePrep's New Mexico L&H quiz bank. Each has a "Show answer & explanation" control, so commit to an answer first.
For every deadline, name the clock. Grace period, notice of claim and proof of loss are different clocks with different lengths, and the wrong options borrow one from another.
Practice Questions 1-6: Annuity Timing, Health Policy Deadlines and Annuity Training
Two questions name an annuity from the client's situation, and three test New Mexico health-policy clocks and clauses: the grace period for a monthly premium, the time limit for proof of loss and which clauses are optional. The last asks about the one-time training a producer must complete before soliciting annuities.
Question 1 (Chapter 6)
A retiree sells his business for a large sum and immediately uses the proceeds to purchase an annuity that will begin paying him a monthly income starting in 60 days. Which type of annuity has he purchased?
- A) Single Premium Deferred Annuity (SPDA)
- B) Flexible Premium Deferred Annuity (FPDA)
- C) Level Premium Immediate Annuity (LPIA)
- D) Single Premium Immediate Annuity (SPIA)
Show answer & explanation
Answer: D
An immediate annuity (SPIA) is purchased with a single lump sum and begins payments within one year of purchase. Deferred annuities delay payments to a future date.
Question 2 (Chapter 6)
A policyholder has an individual health insurance policy with a monthly premium. If the premium is due on October 1st and remains unpaid, what is the minimum grace period required by New Mexico statute NMSA 59A-22-6?
- A) 10 days
- B) 7 days
- C) 30 days
- D) 31 days
Show answer & explanation
Answer: A
NMSA 59A-22-6 requires an individual health policy to provide a grace period of not less than 7 days for weekly premium policies, 10 days for monthly premium policies and 31 days for all other policies, during which the policy stays in force. A monthly premium therefore carries a grace period of at least 10 days.
Question 3 (Chapter 6)
What is the standard time limit for an insured to provide 'Proof of Loss' to the insurer under a New Mexico accident and health policy?
- A) 20 days
- B) 60 days
- C) 180 days
- D) 90 days
Show answer & explanation
Answer: D
Written proof of loss must be furnished to the insurer within 90 days after the date of the loss or, for a claim under which the policy provides periodic payments contingent upon continuing loss, within 90 days after the end of the period for which the insurer is liable (NMSA 59A-22-10). The 20-day period is the separate time for written notice of claim (NMSA 59A-22-8).
Question 4 (Chapter 6)
Which of the following is a 'Uniform Optional Provision' in a New Mexico health insurance policy?
- A) Illegal Occupation
- B) Entire Contract
- C) Claim Forms
- D) Grace Period
Show answer & explanation
Answer: A
Illegal Occupation is an optional provision. Entire Contract, Claim Forms, and Grace Period are all required provisions.
Question 5 (Chapter 6)
A 35-year-old professional in Las Cruces wants to contribute varying amounts of money into an annuity over the next 30 years to build a retirement fund. Which premium payment method is most appropriate for this goal?
- A) Single Premium
- B) Level Premium
- C) Immediate Premium
- D) Flexible Premium
Show answer & explanation
Answer: D
A Flexible Premium Deferred Annuity (FPDA) allows the owner to make contributions of varying amounts at different times during the accumulation period. Single Premium (Option A) is a one-time lump sum, and Level Premium (Option B) requires fixed, regular payments.
Question 6 (Chapter 6)
A producer licensed in another state moves to New Mexico and obtains a resident Life line of authority. Before they can begin soliciting annuities in New Mexico, what specific training must they complete under NMAC 13.9.20?
- A) A one-time 4-credit annuity training course approved by the OSI
- B) A one-time 8-hour course on New Mexico probate law
- C) An annual 2-hour refresher on variable sub-accounts
- D) No additional training is required if they were licensed elsewhere
Show answer & explanation
Answer: A
NMAC 13.9.20.10 requires a producer who sells annuities to complete a one-time, four-credit annuity training course approved by the Office of Superintendent of Insurance (OSI) and provided by an OSI-approved education provider, and a producer who obtains a life insurance line of authority may not sell annuities until the course is completed (13.9.20.10(A)-(B)). Holding a license in another state is not training, although substantially similar annuity training completed in another state is deemed to satisfy the requirement (13.9.20.10(J)).
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Practice Questions 7-12: Beneficiaries, Cost Sharing, Entire Contract and Annuity Disclosure
Irrevocable beneficiaries, deductible and coinsurance arithmetic and the entire contract provision come first. The block then covers the installment refund payout, the free look that applies when annuity disclosure documents are late, and the illegal occupation clause.
Question 7 (Chapter 6)
A policyholder in Taos names his daughter as the 'irrevocable' beneficiary of his accidental death policy. Later, he decides he wants to change the beneficiary to his son. What is required to make this change?
- A) The policyholder must obtain written consent from the daughter
- B) The policyholder simply files a new form with the insurer
- C) The policyholder must wait until the policy anniversary date
- D) Irrevocable beneficiaries cannot be changed under any circumstances
Show answer & explanation
Answer: A
An irrevocable beneficiary has a vested interest in the policy. The policyholder cannot change the beneficiary, assign the policy, or borrow against it without the written consent of the irrevocable beneficiary.
Question 8 (Chapter 6)
An insured has a Major Medical policy with a $1,000 deductible and an 80/20 coinsurance clause. If the insured incurs $6,000 in covered medical expenses, how much will the insurer pay?
- A) $1,000
- B) $4,800
- C) $5,000
- D) $4,000
Show answer & explanation
Answer: D
First, subtract the deductible: $6,000 - $1,000 = $5,000. Then apply the coinsurance: the insurer pays 80% of the remaining $5,000, which is $4,000.
Question 9 (Chapter 6)
A producer tells a client that they can skip the next premium payment and the policy will remain in force because of the producer's special authority. Which provision prevents this verbal statement from being binding?
- A) Entire Contract
- B) Incontestable Clause
- C) Reinstatement Provision
- D) Grace Period
Show answer & explanation
Answer: A
The Entire Contract provision (NMSA 59A-22-4) states that the policy, including the endorsements and attached papers, constitutes the entire contract of insurance. No change in the policy is valid until approved by an executive officer of the insurer and endorsed on or attached to the policy, and no agent has authority to change the policy or waive any of its provisions, so the producer's verbal promise does not bind the insurer.
Question 10 (Chapter 6)
An annuitant selects a 'Life with Installment Refund' payout option. If the annuitant dies after receiving payments totaling $40,000 from a $100,000 accumulation value, how will the beneficiary receive the remaining $60,000?
- A) As a single lump-sum payment only
- B) The remaining $60,000 is forfeited to the insurer
- C) In continued monthly installments until the $100,000 total is reached
- D) As a life income stream based on the beneficiary's life expectancy
Show answer & explanation
Answer: C
The 'Installment Refund' option guarantees that the total amount paid out will at least equal the principal. If the annuitant dies early, the beneficiary receives the remaining balance in the same installment amounts the annuitant was receiving.
Question 11 (Chapter 6)
A producer in Las Cruces sells an annuity but does not provide the Buyer's Guide and Disclosure Document at the time of application. According to NMAC 13.9.12.8, the contract must include a free-look period of at least:
- A) 10 days
- B) 15 days
- C) 20 days
- D) 30 days
Show answer & explanation
Answer: B
If the required disclosure documents are not provided at or before the time of application, the insurer must provide a free-look period of at least 15 days.
Question 12 (Chapter 6)
An insured is injured while participating in an illegal professional drag racing event. If the policy contains the 'Illegal Occupation' optional provision, how will the insurer handle the claim?
- A) The insurer will pay the claim in full
- B) The insurer will pay a pro-rata share of the claim
- C) The insurer is not liable for the loss
- D) The insurer will pay the claim but then cancel the policy
Show answer & explanation
Answer: C
The 'Illegal Occupation' provision states that the insurer is not liable for any loss to which a contributing cause was the insured's commission of a felony or being engaged in an illegal occupation.
Practice Questions 13-17: Suitability, Immediate Annuities, Misstatement and Waiting Periods
The annuity best-interest rule and what it excepts come first, then a second timing question about what makes an annuity immediate. The block ends with the two misstatement rules for health policies and a disability elimination period.
Question 13 (Chapter 6)
Which of the following transactions is EXCEPTED from the New Mexico Suitability in Annuity Transactions rule (NMAC 13.9.20)?
- A) A recommendation to a 70-year-old to buy a fixed annuity
- B) A producer recommending a variable annuity to a high-net-worth individual
- C) An employee enrolling in an ERISA-governed employer 401(k) plan
- D) A resident of Santa Fe purchasing an annuity via a local producer
Show answer & explanation
Answer: C
NMAC 13.9.20 explicitly excepts recommendations involving ERISA plans, employer-sponsored 401(k), 403(b), and 457 plans.
Question 14 (Chapter 6)
An investor in Santa Fe deposits a $50,000 lump sum into an annuity on January 1st. She intends to start receiving monthly income payments on December 1st of the same year. This contract is classified as a(n):
- A) Flexible Premium Deferred Annuity
- B) Single Premium Deferred Annuity
- C) Immediate Annuity
- D) Variable Accumulation Annuity
Show answer & explanation
Answer: C
An immediate annuity is one where the first payout begins within one year (12 months) of the premium payment. Since the payments start 11 months after the lump sum deposit, it is an immediate annuity.
Question 15 (Chapter 6)
A policyholder has a Comprehensive Major Medical policy in New Mexico. Three years after the policy was issued, the insurer discovers an unintentional misstatement regarding the insured's history of minor allergies. According to NMSA 59A-22-5, the insurer may:
- A) Rescind the policy and refund all premiums.
- B) Deny any future claims related to allergies.
- C) Not void the policy or deny a claim, as the misstatement was not willful or fraudulent.
- D) Increase the premium retroactively to the date of issue.
Show answer & explanation
Answer: C
For comprehensive major medical policies, NMSA 59A-22-5(A) provides that, as of the date of issue, no misstatement except a willful or fraudulent one made in the application can be used to void the policy or deny a claim. An unintentional misstatement about minor allergies therefore does not allow rescission or denial of related claims; the issuer may only prospectively rate and collect the premium that would have been charged had the misstatement not been made.
Question 16 (Chapter 6)
A woman in Rio Rancho misstates her age as 30 on a health insurance application when she is actually 35. If she files a claim, how will the insurer handle the 'Misstatement of Age' provision?
- A) The insurer will deny the claim and keep all premiums.
- B) The insurer will pay the claim in full but charge a $500 penalty.
- C) The insurer will adjust the benefits to what the premium paid would have purchased at the correct age.
- D) The insurer must pay the claim in full if the policy has been in force for at least two years.
Show answer & explanation
Answer: C
Under the Misstatement of Age provision, the insurer adjusts the benefits to match what the premiums paid would have purchased at the insured's correct age.
Question 17 (Chapter 6)
An insured has a disability income policy with a 90-day 'Elimination Period.' If the insured becomes disabled on January 1st and remains disabled, when will the first benefit payment be earned?
- A) January 1st
- B) February 1st
- C) April 1st
- D) July 1st
Show answer & explanation
Answer: C
The elimination period is a 'time deductible.' The insured must be disabled for 90 days before benefits begin to accrue. 90 days after January 1st is approximately April 1st.
The Mistakes That Cost Marks
Reading "immediate" as "starting in a few weeks." An immediate annuity pays its first benefit within one year of purchase, so income that starts eleven months after a lump sum is still immediate. A flexible premium annuity takes contributions of varying amounts over time, while a single premium annuity takes one lump sum.
Swapping the health-policy clocks. The grace period is at least 7 days for weekly premiums, 10 days for monthly premiums and 31 days for all others, so a monthly premium means 10 days. Written notice of claim is due within 20 days, and proof of loss within 90 days.
Confusing required and optional provisions. Entire contract, claim forms and grace period are required; illegal occupation is optional. Under the entire contract provision, no agent has authority to change the policy or waive its provisions, so a producer's promise that a premium can be skipped binds no one.
Applying the two-year clock to comprehensive major medical. For a comprehensive major medical policy, no misstatement except a willful or fraudulent one can void the policy or deny a claim from the date of issue, and the insurer may only re-rate going forward. A misstated age is handled differently: benefits are adjusted to what the premium paid would have bought at the correct age.
Remembering the annuity rules loosely. A producer completes a one-time, four-credit annuity training course approved by the Office of Superintendent of Insurance (OSI) before selling annuities, and a license held before a move to New Mexico does not replace it. The best-interest rule excepts ERISA plans, employer 401(k), 403(b) and 457 plans, and direct-response sales without a recommendation. An annuity whose buyer's guide and disclosure document are not delivered at or before the application carries a free look of at least 15 days.
Rushing the arithmetic. Subtract the deductible first, then apply coinsurance to what remains: $6,000 less a $1,000 deductible leaves $5,000, and an 80/20 split pays $4,000. An elimination period is a time deductible, so benefits begin only after the waiting days have passed.
Your Next Step
Deadlines and definitions stick best with repetition. Chapter 1 of LanePrep's New Mexico Life & Health course is free, and chapter 6 covers annuities and accident and health provisions in audio. Then continue with the disability income and medical plans set.
Every topic set is listed on the free New Mexico Life & Health practice questions page, and the health exam practice page goes deeper on the health side.
Question counts and content weighting come from the PSI New Mexico examination content outline effective July 1, 2026.
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