17 Free New Mexico Life & Health Practice Questions: Disability Income and Medical Plans (2026)
How to Use This Disability Income and Medical Plans Set
Disability Income and Related Insurance is 4% of the exam (6 scored items) and Medical Plans is 10% (15 items), so 21 of the 150 scored items, 14%, sit in this set. Chapter 7 of the LanePrep course covers both.
The disability questions turn on definitions, waiting periods and who owns and benefits from business coverage. The medical questions turn on managed care, the metal tiers of the Affordable Care Act (ACA), dependent coverage and the right-to-return and privacy rules New Mexico attaches. 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.
Do not turn a specific return period into a general rule. Several New Mexico periods are narrow: each attaches to one kind of policy and says nothing about the others.
Practice Questions 1-6: Disability Provisions, Offsets and the ACA Metal Tiers
This block covers presumptive disability, group offsets, the arithmetic of an elimination period, the indemnity approach to benefits and disability buy-sell cover. One question steps away to the ACA's metal tiers.
Question 1 (Chapter 7)
An insured is a surgeon who loses the use of both hands in a mountain biking accident in the Sandia Mountains. His disability policy immediately begins paying full benefits, even though he is technically capable of teaching at a medical school. This is an example of which policy provision?
- A) Presumptive Disability
- B) Residual Disability
- C) Recurrent Disability
- D) Partial Disability
Show answer & explanation
Answer: A
Presumptive disability provisions automatically deem the insured totally disabled if they suffer the total and permanent loss of sight in both eyes, hearing in both ears, speech, or the use of any two limbs, regardless of their ability to work in another capacity.
Question 2 (Chapter 7)
A consumer is comparing plans on the health insurance exchange. She wants a plan that has the highest monthly premiums but the lowest out-of-pocket costs when she receives care. Which Affordable Care Act (ACA) metallic level should she choose?
- A) Bronze
- B) Silver
- C) Gold
- D) Platinum
Show answer & explanation
Answer: D
Platinum plans have the highest actuarial value (90%), meaning they pay the highest percentage of care costs, resulting in the highest premiums but lowest deductibles and copays for the consumer.
Question 3 (Chapter 7)
A worker in Clovis is injured on the job and receives Workers' Compensation benefits. He also has a Group Long-Term Disability (LTD) plan through his employer. How will the Group LTD plan typically handle the benefit payment?
- A) It will be coordinated (offset) so that the total benefit from all sources does not exceed a certain percentage of pre-disability income.
- B) It will pay the full benefit in addition to Workers' Comp.
- C) It will cancel the policy because the injury was occupational.
- D) It will only pay if the worker waives his right to Workers' Comp.
Show answer & explanation
Answer: A
Group disability plans almost always include a coordination of benefits provision that offsets the plan's payments by the amount received from Workers' Compensation or Social Security to prevent over-insurance.
Question 4 (Chapter 7)
An individual disability policy has a 30-day elimination period and a $2,000 monthly benefit. The insured is disabled for 45 days. How much will the insurer pay?
- A) $1,000
- B) $0
- C) $2,000
- D) $3,000
Show answer & explanation
Answer: A
The elimination period is a waiting period during which no benefits are paid. The insurer only pays for the days of disability after the elimination period. 45 days total - 30 day elimination = 15 days of benefits. 15 days is half a month, so $1,000.
Question 5 (Chapter 7)
Two partners own a construction firm in Rio Rancho. They want to ensure that if one partner becomes permanently disabled, the other partner has the funds to buy out the disabled partner's interest in the business. They should purchase:
- A) Disability Buy-Sell Insurance
- B) Business Overhead Expense Insurance
- C) Key Person Disability Insurance
- D) Workers' Compensation
Show answer & explanation
Answer: A
Disability Buy-Sell insurance provides the funds necessary to execute a buy-sell agreement, allowing the healthy partner to purchase the disabled partner's share of the business. It usually involves a long elimination period (e.g., 1 or 2 years).
Question 6 (Chapter 7)
A landscape architect in Santa Fe has a disability income policy that pays a flat benefit of $3,500 per month if he is unable to work, regardless of whether his actual monthly income loss is higher or lower than that amount. Which approach to benefit determination does this policy use?
- A) Loss-of-income approach
- B) Residual approach
- C) Proportional approach
- D) Indemnity approach
Show answer & explanation
Answer: D
The indemnity approach pays a fixed, stated credit amount regardless of the insured's actual earnings or the specific amount of income lost. The loss-of-income approach (also called the residual approach) instead calculates benefits based on a percentage of the actual income lost.
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Practice Questions 7-12: Key Employee Cover, Managed Care, Dependents and Right-to-Return Periods
Key employee disability, the HMO gatekeeper and coverage for a disabled adult child come first. Coordination of benefits in disability income follows, with the two New Mexico right-to-return rules for disability income policies and individual HMO contracts.
Question 7 (Chapter 7)
The owner of a specialized laboratory in Los Alamos wants to protect the business against the financial loss that would occur if their lead scientist became disabled. The business purchases a policy where the business is the owner, premium payer, and beneficiary. This is an example of:
- A) Key Employee Disability
- B) Business Overhead Expense (BOE)
- C) Disability Buy-Sell
- D) Group Long-Term Disability
Show answer & explanation
Answer: A
Key Employee Disability insurance provides the business with funds to recruit and train a replacement or cover lost revenue when a vital employee becomes disabled. BOE (Option B) covers the actual expenses of the business (rent, utilities) but not the loss of the employee's talent.
Question 8 (Chapter 7)
An individual in Santa Fe is a member of a Health Maintenance Organization (HMO). He has developed a persistent cough and wants to see a pulmonologist. What is the required first step in this managed care model?
- A) Contact the Pulmonologist directly for an appointment
- B) File a pre-claim authorization with the Superintendent of Insurance
- C) Pay the annual deductible before seeking specialist care
- D) Obtain a referral from his Primary Care Physician (PCP)
Show answer & explanation
Answer: D
In an HMO, the Primary Care Physician (PCP) acts as a 'gatekeeper.' Members must generally see their PCP first, and the PCP must provide a referral before the member can see a specialist.
Question 9 (Chapter 7)
A New Mexico resident has a 27-year-old daughter who has a severe physical disability and is incapable of self-sustaining employment. According to NMSA 59A-22-33, how does the daughter's status affect her coverage under her father's health plan?
- A) She must be removed from the plan because she is over age 26
- B) She can remain on the plan only if the father pays a 50% surcharge
- C) She can remain on the plan indefinitely as long as she remains incapacitated and dependent
- D) She must switch to a New Mexico state-run high-risk pool
Show answer & explanation
Answer: C
NMSA 59A-22-33 provides that coverage for a dependent child shall not terminate at the limiting age (usually 26) if the child is and continues to be both incapable of self-sustaining employment by reason of intellectual or physical disability and chiefly dependent upon the policyholder for support.
Question 10 (Chapter 7)
A worker in Carlsbad has a Group Long-Term Disability (LTD) plan. He becomes disabled and begins receiving Social Security disability benefits. His Group LTD plan reduces his monthly benefit by the amount he receives from Social Security. This is an example of:
- A) Subrogation
- B) Coordination of Benefits
- C) Malingering prevention
- D) The Indemnity approach
Show answer & explanation
Answer: B
Coordination of Benefits in disability insurance (often called an 'offset') prevents over-insurance by reducing the private insurance benefit by amounts received from other sources like Social Security or Workers' Compensation.
Question 11 (Chapter 7)
A producer in Albuquerque sells an individual disability income policy. The applicant pays the first premium and receives the policy. 25 days later, the applicant decides the policy is too expensive. According to New Mexico rules, what is the producer's obligation?
- A) The producer can keep the commission, but the insurer must refund the premium
- B) The producer must facilitate a full refund because the policy has a 30-day right to return
- C) The producer must inform the client that the free-look period was only 10 days
- D) The producer must charge a $50 cancellation fee as allowed by NMSA
Show answer & explanation
Answer: B
Under NMAC 13.10.34.18(F), disability income and other supplemental plans in New Mexico must provide a 30-day right to return for a full refund. Since the applicant is within that 30-day window, they are entitled to a full refund.
Question 12 (Chapter 7)
A resident of Silver City enrolls in an individual Health Maintenance Organization (HMO) plan. After receiving the contract, he decides he prefers his old PPO plan. According to NMSA 59A-46-8(C), how many days does he have to examine the contract and return it for a full refund of any premiums paid?
- A) 15 days
- B) 10 days
- C) 20 days
- D) 30 days
Show answer & explanation
Answer: B
Under New Mexico statute NMSA 59A-46-8(C), an individual HMO contract must provide a 'right to examine' (free look) period of at least 10 days from the date of delivery.
Practice Questions 13-17: Coverage Triggers, Capitation, Health Privacy and Occupation Definitions
This block covers 24-hour coverage, how an HMO pays its physicians and New Mexico's authorization (opt-in) rule for health information. It ends with who benefits from key person disability cover and what happens when an own-occupation definition turns into any-occupation.
Question 13 (Chapter 7)
A self-employed consultant in Santa Fe purchases an individual disability income policy. He wants to ensure he is covered for accidents that happen both while he is working and while he is on vacation. Which type of coverage should he verify is in the policy?
- A) Occupational-only coverage
- B) Non-occupational coverage
- C) 24-hour (Occupational and Non-occupational) coverage
- D) Workers' Compensation supplemental coverage
Show answer & explanation
Answer: C
He wants protection whether the accident happens on the job or off it, such as on vacation. That is 24-hour coverage: the policy is both occupational and non-occupational, so it pays for a disability from an accident or sickness wherever it happens. Most individual disability policies provide it. An occupational-only policy would leave the vacation accident uncovered, and a non-occupational policy would leave job-related accidents uncovered. Group plans are often non-occupational because on-the-job injuries are covered by workers' compensation.
Question 14 (Chapter 7)
A Health Maintenance Organization (HMO) in Las Cruces pays its participating physicians a set monthly fee for each member assigned to them, regardless of whether the member actually seeks medical care that month. This payment method is known as:
- A) Fee-for-service
- B) Indemnity
- C) Capitation
- D) Coinsurance
Show answer & explanation
Answer: C
Capitation is a hallmark of HMOs. The provider is paid a fixed amount per head ('caput') per month. This shifts the financial risk to the provider and encourages preventive care to keep members healthy.
Question 15 (Chapter 7)
According to New Mexico's Consumer Information Privacy regulations (NMAC 13.1.3), if a health insurer wants to share an insured's nonpublic personal health information with a nonaffiliated third party for marketing purposes, what must they obtain?
- A) A verbal agreement from the insured
- B) The insured's written or electronic authorization (opt-in)
- C) A signed waiver from the Office of Superintendent of Insurance
- D) Nothing, as long as the insured was given an opt-out notice
Show answer & explanation
Answer: B
New Mexico is an 'opt-in' state for health information. Under NMAC 13.1.3, a licensee cannot disclose nonpublic personal health information unless they have obtained a specific written or electronic authorization from the consumer.
Question 16 (Chapter 7)
A tech company in Albuquerque wants to protect itself against the loss of its lead developer. The company buys a Key Person Disability policy. Who is typically the beneficiary of this policy?
- A) The lead developer's spouse
- B) The lead developer
- C) The tech company
- D) The New Mexico Life and Health Guaranty Association
Show answer & explanation
Answer: C
In Key Person Disability insurance, the business is the owner, the premium payer, and the beneficiary. The benefits are used to find, hire, and train a replacement for the disabled key employee.
Question 17 (Chapter 7)
A 55-year-old engineer in Albuquerque has a group long-term disability (LTD) plan with a 'own-occupation' definition for the first 24 months, switching to 'any-occupation' thereafter. He becomes totally disabled due to a degenerative nerve condition. After 30 months, the insurer determines he can perform the duties of a sedentary office job for which he is qualified by education and experience. What is the likely outcome?
- A) Benefits continue because he cannot perform his own occupation as an engineer
- B) Benefits cease because he can perform an occupation for which he is reasonably suited
- C) Benefits continue at a reduced rate under the residual disability provision
- D) Benefits are converted to a lump-sum settlement under the policy's commutation clause
Show answer & explanation
Answer: B
B is correct. After the 24-month own-occupation period, the definition of total disability changes to any-occupation. If the insurer determines the insured can perform the duties of any occupation for which he is reasonably suited by education, training, or experience (such as a sedentary office job), total disability benefits cease. A is incorrect because the own-occupation definition no longer applies after 24 months. C is incorrect because residual disability applies when the insured is working but with reduced earnings, not when the insurer determines he can work in another occupation. D is incorrect; commutation is not a standard automatic provision triggered by a definition change.
The Mistakes That Cost Marks
Turning one return period into a general free look. New Mexico's right-to-return periods are narrow. Disability income and the other limited-benefit plans (accident-only, specified disease, hospital indemnity, other fixed indemnity, supplemental) carry 30 days by rule. An individual HMO contract carries 10 days by statute (NMSA 59A-46-8(C)). An ordinary individual life policy has none by statute.
Ending a disabled child's coverage at 26. Coverage for an unmarried dependent may not end before 26, and a child who is incapable of self-sustaining employment because of a disability and is chiefly dependent on the policyholder stays covered past the limiting age.
Confusing presumptive, residual and total disability. Presumptive disability treats the total and permanent loss of sight in both eyes, hearing in both ears, speech or the use of any two limbs as total disability, whatever the person could still do. Residual disability pays when the insured is working with reduced earnings. After an own-occupation period, an any-occupation definition ends benefits if the insured can work in an occupation he or she is reasonably suited for.
Mishandling offsets and waiting periods. Group long-term disability plans reduce their benefit by amounts received from workers' compensation or Social Security. An elimination period pays nothing for the waiting days: with a 30-day wait and 45 days of disability, only the last 15 days are paid.
Mixing up the business coverages. Disability buy-sell funds the purchase of a disabled partner's interest. Key employee (key person) disability makes the business the owner, premium payer and beneficiary. Business overhead expense pays the business's running costs, not the loss of a person.
Treating health privacy as opt-out. New Mexico's privacy regulation (NMAC 13.1.3) requires a written or electronic authorization before nonpublic personal health information is disclosed. An opt-out notice is not enough.
Your Next Step
Hear the return periods and the privacy rule in context before you drill them. Chapter 1 of LanePrep's New Mexico Life & Health course is free, and chapter 7 covers disability income and medical plans in audio. Then continue with the group health, specialized health and taxation 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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