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New Mexico Property & Casualty Practice Exam

20 exam-style questions drawn from the same bank as our full New Mexico Property & Casualty course (New Mexico Property and Casualty Insurance Producer — Exam Prep). Answer all 20, then grade yourself — most state exams require 70% to pass. Explanations for every question are part of the full course.

1. An insured owns a seasonal cabin that is unoccupied more than 60 consecutive days each year. Which dwelling-form limitation most directly affects coverage?
Theft coverage automatically doubles to compensate for the increased vacancy risk, subject to a higher percentage deductibleCoverage is void entirely while the cabin is unoccupied for any period exceeding 60 consecutive days during the policy termFire coverage drops to 50% of Coverage A after 60 days of vacancy, with proportional reductions applied to other coveragesVandalism and Malicious Mischief (VMM) and glass breakage are excluded after 60 consecutive days of vacancy
2. A Certificate of Insurance (COI) issued to a third party (e.g., a general contractor receiving a COI from its subcontractor's insurer) does which of the following?
Is considered a policy change and binds the insurer to whatever is on the certificate.Grants the certificate holder additional-insured status automatically.Provides evidence of coverage without altering, extending, or granting rights under the actual policy.Obligates the insurer to notify the certificate holder of cancellation.
3. A manufacturer of defective kitchen knives is held liable for injuries regardless of whether the plaintiff can prove negligence or intent. This liability theory is called:
Vicarious liability.Contributory negligence.Strict liability.Comparative negligence.
4. An NFIP Standard Flood Insurance Policy (SFIP) Dwelling Form offers what maximum limits?
Unlimited, subject to insurer approval$1M building / $1M contents$250,000 building / $100,000 contents$500,000 building / $500,000 contents
5. A signed insurance application typically becomes part of the policy because:
State law requires it automatically for all policies — required under the federal preemption framework that yields here to the state-law ruleThe policy's entire contract clause specifically incorporates the application by reference.The insurer scans it for recordkeeping only — applicable to surplus-lines placements, which the scenario explicitly excludesThe agent hands a copy to the underwriter — required if and only if the policy includes a co-insurance penalty endorsement
6. An OCCURRENCE-form CGL responds to a claim if:
The claim is reported during the policy period, regardless of when the injury happened — required under a separate compliance provision that doesn't reach this fact patternThe insured pays an extended reporting period premium — though only when the underlying contract contains an explicit waiver, which the scenario doesn't establishThe injury or property damage took place during the policy period, regardless of when the claim is reported.The insurer was notified of the occurrence before binding, per the safe-harbor exception that activates only for primary-state filings
7. Under New Mexico's Unfair Insurance Practices Act (NMSA §59A-16), private rights of action by consumers against insurers for unfair claim settlement practices are:
Permitted, but limited to recovery of the policy proceeds with no consequential damages — applies if the loss is partial; this question describes a constructive total lossNot permitted under any circumstances — only the Superintendent may enforce — under the older rule that was superseded by the post-2018 model amendmentsPermitted, with potential recovery of actual damages, punitive damages in some circumstances, and attorney feesPermitted only after the consumer obtains a Superintendent's hearing decision — only when the contract was issued before the regulatory amendment described above
8. Which of the following is a risk MANAGEMENT technique, NOT a type of hazard?
Physical hazardRisk transferMoral hazardMorale hazard
9. Which dwelling form settles all losses on an actual cash value basis?
DP-2DP-3DP-1None of the above
10. Which of the following is MOST commonly EXCLUDED by a personal umbrella policy?
Bodily injury from a covered auto accident in excess of the PAP limit, consistent with the model regulation but inapplicable to this scenarioLibel or slander published on the insured's personal social media — applicable to commercial scenarios only, not the personal-lines contextLiability arising from the insured's ownership of a business, professional practice, or rental property operated as a business.Damage to a neighbor's fence caused by a falling tree on the insured's property — required under a separate compliance provision that doesn't reach this fact pattern
11. A commercial general liability policy has a deposit premium of $12,000 based on an estimate of $1M in annual receipts. The audit at year-end shows actual receipts of $1.4M. What does the insurer do?
Bill an additional premium for the difference between estimated and actual exposure.Refund 40% of the premium because the insured was overcharged — required if and only if the policy includes a co-insurance penalty endorsementCancel the policy retroactively — applicable to surplus-lines placements, which the scenario explicitly excludesRefund nothing and keep the $12,000 as the final premium — required under the federal preemption framework that yields here to the state-law rule
12. Under NMSA §59A-17A (Use of Insurance Scoring), a New Mexico auto or homeowners insurer that takes adverse action based in whole or in part on a credit-based insurance score must:
Refer the file to the New Mexico Attorney GeneralSubmit the credit-based scoring model to the Superintendent for re-approval each yearRefund all premium paid in the prior 12 monthsProvide notice to the applicant identifying the action and the consumer reporting agency used
13. How frequently must the New Mexico OSI examine the financial affairs of every domestic insurer under NMSA Chapter 59A?
Only when a market conduct complaint is filedAt least once every yearAt least once every five yearsAt least once every three years
14. An 'Extended Reporting Period' (ERP) on a claims-made CGL:
Is automatic and free for all claims-made policies — under the older rule that was superseded by the post-2018 model amendments — though only when the underlying contract contains an explicit waiver, which the scenario doesn't establishExtends the policy period and covers new wrongful acts indefinitely — applicable to surplus-lines placements, which the scenario explicitly excludes — required under a separate compliance provision that doesn't reach this fact patternAllows claims to be REPORTED after policy expiration for wrongful acts that occurred during or prior to the policy period (after the retro date); does NOT extend coverage for new wrongful acts.Converts a claims-made policy into an occurrence policy retroactively — applies if the loss is partial; this question describes a constructive total loss, per the safe-harbor exception that activates only for primary-state filings
15. Under Section II of an ISO HO-3, which of the following would be COVERED under Coverage E — Personal Liability?
A dog bite to a neighbor that occurs on the insured's lawnLiability arising from business activities of the insuredBodily injury to a resident relative of the named insuredDamage to property the insured has rented for three months
16. Concealment in an insurance application means:
Hiding the policy document from claimants — though only when the underlying contract contains an explicit waiver, which the scenario doesn't establishFailing to disclose a material fact that a reasonable applicant would have disclosed.Making an affirmative false statement — required under a separate compliance provision that doesn't reach this fact patternAsking the agent to redact information, per the safe-harbor exception that activates only for primary-state filings
17. An insured is stopped at a red light when a hit-and-run driver rear-ends her. She suffers $18,000 in medical bills and $6,000 in damage to her vehicle. Her PAP has Part A 30/60/25, Part B Medical Payments $5,000, Part C UM 30/60, and Part D collision with a $500 deductible. Which parts of her PAP respond to her medical bills?
Part C only — UM is the exclusive coverage for injuries caused by an uninsured driver — only when the contract was issued before the regulatory amendment described abovePart B (Medical Payments) and Part C (Uninsured Motorists) — Part B pays first-dollar regardless of fault up to its limit, and Part C responds because the at-fault driver is uninsured.Part B and Part D — Part B pays medicals and Part D pays for the vehicle damage including medical bills — under the older rule that was superseded by the post-2018 model amendmentsPart A, because she was injured in a covered auto — applicable to surplus-lines placements, which the scenario explicitly excludes
18. A personal umbrella has a $500 Self-Insured Retention (SIR). The insured is sued for libel (a personal-injury offense) — a loss NOT covered by the underlying HO. The umbrella DOES cover libel. Damages are $75,000. How does the umbrella respond?
The umbrella pays nothing because the underlying HO did not pay first.The insured must sue the libel victim to trigger coverage before the umbrella responds.The umbrella pays $75,000 with no retention — the SIR applies only to claims shared with the underlying.The umbrella requires the insured to pay the $500 SIR first; the umbrella then pays the remaining $74,500.
19. Which section of a standard property insurance policy identifies the specific property covered, the policy period, the premium, and the named insured?
Declarations pageInsuring agreementExclusionsConditions
20. An investigation determines the named insured deliberately set fire to her dwelling. A $210,000 mortgage balance is outstanding and the policy contains a standard (union) mortgage clause. The dwelling coverage limit is $250,000. How should the insurer handle the claim?
Pay the mortgagee up to the loan balance of $210,000 and deny the insured; the insurer may then pursue subrogation against the insured.Pay the insured the full $250,000 and let the mortgagee recover from the insured's share — under the older rule that was superseded by the post-2018 model amendmentsDeny the entire claim; the intentional act voids coverage for all parties — applicable to surplus-lines placements, which the scenario explicitly excludesPay the full $250,000 dwelling limit to the mortgagee and refund the insured's premium — required if and only if the policy includes a co-insurance penalty endorsement

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