17 Free New Mexico Life & Health Practice Questions: Federal Law and General Insurance Concepts (2026)

Question 1 (Chapter 2)

Michael, a licensed insurance producer, was convicted of a felony involving breach of trust five years ago. He is now seeking employment with a new insurance agency. Under 18 U.S.C. Sections 1033 and 1034, what must Michael do to legally work in the business of insurance?

• A) He must wait until ten years have passed since his conviction, at which point the felony is no longer considered relevant.
• B) He only needs to disclose his conviction to his employer, as long as it was not related to insurance fraud.
• C) He is permanently barred from working in the insurance industry due to the nature of his felony conviction.
• D) He must obtain a Letter of Written Consent from the appropriate insurance regulator to work in the business of insurance.

Question 2 (Chapter 2)

A potential client receives an unsolicited telemarketing call from an insurance producer. The client is registered on the National Do Not Call List. What federal regulation has the producer likely violated?

• A) National Do Not Call List regulations
• B) Gramm-Leach-Bliley Act (GLBA)
• C) Fair Credit Reporting Act (FCRA)
• D) CAN-SPAM Act

Question 3 (Chapter 2)

A consumer receives a privacy notice from their insurance company detailing how their nonpublic personal financial information is collected, used, and shared. This notice is a requirement primarily mandated by which federal law?

• A) Affordable Care Act (ACA)
• B) Fair Credit Reporting Act (FCRA)
• C) 18 U.S.C. Sections 1033 and 1034
• D) Gramm-Leach-Bliley Act (GLBA)

Question 4 (Chapter 2)

The Affordable Care Act (ACA) established various reforms in the health insurance market. From a federal law perspective, what is the primary role of the ACA within the scope of this course?

• A) It dictates the specific premium rates for all individual health insurance policies nationwide.
• B) It exclusively regulates Medicare Supplement insurance plans.
• C) It provides a comprehensive list of all permissible health insurance policy provisions.
• D) It serves as the federal framework underlying much of the Medical Plans and Specialized Health Insurance content.

Question 5 (Chapter 2)

A small business owner decides not to open a new branch in an area prone to severe flooding, despite potential market opportunities. By choosing not to engage in the activity that carries the risk, which method of handling risk is the owner employing?

• A) Risk reduction
• B) Risk retention
• C) Risk sharing
• D) Risk avoidance

Question 6 (Chapter 2)

An insurance company is incorporated in Arizona but holds a Certificate of Authority to conduct business in New Mexico. From the perspective of New Mexico, how would this insurer be classified?

• A) Domestic insurer
• B) Alien insurer
• C) Non-admitted insurer
• D) Foreign insurer

Question 7 (Chapter 2)

Under 18 U.S.C. Sections 1033 and 1034, what specific types of felony convictions generally require a person to obtain a Letter of Written Consent from an insurance regulator to work in the business of insurance?

• A) Felonies involving dishonesty or breach of trust.
• B) Any felony conviction, regardless of its nature.
• C) Only felonies related to violent crimes.
• D) Felonies committed more than 10 years ago.

Question 8 (Chapter 2)

An applicant for a disability income policy is informed by the insurer that their application was denied due to information contained in a consumer report. Under the Fair Credit Reporting Act (FCRA), what right does the applicant have in this situation?

• A) The right to demand the insurer immediately approve the policy at a standard rate.
• B) The right to sue the consumer reporting agency for defamation without first disputing the report.
• C) The right to prevent the insurer from ever obtaining another consumer report on them.
• D) The right to receive a copy of the report and dispute inaccurate information.

Question 9 (Chapter 2)

A health insurance company encourages its policyholders to participate in wellness programs, offering discounts on premiums for regular exercise and healthy eating. Which method of handling risk is the insurance company promoting through these wellness programs?

• A) Risk reduction.
• B) Risk avoidance.
• C) Risk retention.
• D) Risk sharing.

Question 10 (Chapter 2)

A group of individuals with similar risks form an unincorporated organization where they agree to insure one another. Each member acts as both an insurer and an insured, and the organization is managed by an attorney-in-fact. This is an example of a:

• A) Stock Insurer
• B) Mutual Insurer
• C) Fraternal Benefit Society
• D) Reciprocal Insurer

Question 11 (Chapter 2)

An insurance contract is 'aleatory' because:

• A) The exchange of values between the parties may be unequal.
• B) Only the insurer makes a legally enforceable promise.
• C) The contract is based on the principle of indemnity.
• D) The insured must adhere to the terms drafted by the insurer.

Question 12 (Chapter 2)

Which of the following is a requirement for a risk to be considered 'insurable' by a private insurance company?

• A) The loss must be intentional on the part of the insured.
• B) The loss must be catastrophic to the entire population at once.
• C) The loss must be due to chance and definite as to time and place.
• D) The potential loss must be small and insignificant to the insurer.

Question 13 (Chapter 2)

If an insurance company is 'admitted' in New Mexico, it means the company:

• A) Is domiciled in New Mexico.
• B) Has been issued a Certificate of Authority by the Superintendent of Insurance.
• C) Is a non-profit mutual insurer.
• D) Only sells policies through independent brokers.

Question 14 (Chapter 2)

An applicant applies for an individual health policy at standard rates. During underwriting, the insurance company reviews the applicant's credit score report and, based on that report, issues the policy at a higher, substandard premium rate (rating the policy). Under the Fair Credit Reporting Act (FCRA), what is the insurer required to do?

• A) Nothing, because adverse action notices are required only when an application is declined outright
• B) Provide an adverse action notice informing the applicant that the higher rate was based on the consumer credit report and outlining their FCRA rights
• C) Refund all previous premiums paid and immediately cancel the coverage
• D) Notify the Federal Trade Commission before delivering the insurance policy to the client

Question 15 (Chapter 2)

An underwriter evaluates two separate applications: Applicant A's file reveals severe, untreated hypertension (a physical condition increasing mortality risk), while Applicant B has a history of bankruptcy and intentional insurance fraud convictions. How should the underwriter classify these hazards?

• A) Applicant A presents a moral hazard; Applicant B presents a physical hazard
• B) Applicant A presents a physical hazard; Applicant B presents a moral hazard
• C) Both applicants present morale hazards
• D) Applicant A presents a peril; Applicant B presents a legal hazard

Question 16 (Chapter 2)

An insurance company supplies a producer with official company rate charts, application booklets, software that generates binding premium quotes, and sales literature featuring the corporate logo. Although the producer's written contract forbids binding temporary coverage, the producer tells a client that coverage is effective immediately upon premium payment. Why might the insurer be held legally liable for a claim occurring that night?

• A) The producer acted with express written authority
• B) The insurer created apparent authority by supplying materials that led a reasonable consumer to believe the producer had binding power
• C) Health insurance contracts are governed by absolute strict liability
• D) The applicant signed a unilateral warranty agreement

Question 17 (Chapter 2)

Company A issues life insurance policies up to $5,000,000. To manage its financial exposure, Company A enters into a master agreement with Reinsurer B, under which Reinsurer B automatically accepts and cedes 50% of every life insurance policy written by Company A that exceeds $1,000,000, without individual underwriting review of each policy. This type of reinsurance arrangement is called:

• A) Facultative reinsurance
• B) Treaty reinsurance
• C) Mutual assessment pooling
• D) Surplus lines indemnity