NM Life & Health key terms

A financial or emotional stake in a person's life or health such that losing that person would cause real harm; it must exist when the policy is applied for.

A situation with only two possible outcomes, loss or no loss, and no chance of profit; insurers generally cover pure risks such as premature death or serious illness.

The tendency for people who expect to need coverage most, such as those in poor health, to buy or keep insurance while lower-risk people drop out, pushing costs up.

A statistical rule that the more similar exposure units an insurer covers, the more closely actual losses match predicted averages, making rates more dependable.

Restoring an insured person to roughly the same financial position held before a loss, so that benefits do not create a profit from the misfortune.

The duty of both applicant and insurer to be honest and to reveal facts that would affect the decision to insure, since the insurer cannot directly verify the applicant's health.

An agreement where the value exchanged is unequal and depends on chance, so an insured may pay small premiums and later collect a large benefit, or collect nothing.

A policy prepared by the insurer with little room for negotiation, so courts read unclear wording against the insurer and in favor of the policyholder.

Voluntarily giving up a known legal right, such as when an insurer accepts a late premium and thereby gives up its option to deny a claim because of that lapse.

A rule preventing a party from reclaiming a right it gave up, or from denying conduct that another party reasonably relied on to its own detriment.

The person or entity first in line to receive policy proceeds when the insured dies; if that person is alive at the death, later-named beneficiaries receive nothing.

The backup recipient of policy proceeds who is paid only if the primary beneficiary has already died or otherwise cannot collect the money.

The savings portion built up inside a permanent life policy that the owner can borrow against, withdraw, or receive when surrendering the contract.

A premium that stays the same for the life of the policy even though the risk of death rises, because the insurer averages costs over many years.

Coverage for a set number of years that pays a death benefit only if the insured dies during that period and builds no cash value.

Permanent coverage that lasts the insured's entire life, charges a level premium, and builds guaranteed cash value the owner can access.

Flexible permanent coverage that separates the death benefit from the savings account, letting the owner adjust premium or benefit amounts as interest credits change.

Choices letting a permanent policy owner who stops paying premiums keep some value, such as cash surrender, reduced paid-up insurance, or extended term insurance.

A provision stating that after the policy has been in force for a set period, usually two years, the insurer can no longer cancel coverage for misstatements on the application.

A short time after a premium due date during which the policy stays in force; if the insured dies in that window, the overdue premium is deducted from the benefit.

Money borrowed from a permanent policy's cash value by the owner; interest accrues, and any unpaid balance plus interest reduces the death benefit or surrender value.

Restoring a lapsed policy to full force by paying overdue premiums with interest and providing proof of insurability, usually within a set time after the lapse.

A window right after delivery, set by state law, in which the owner can return a new policy for a full premium refund without giving any reason.

The amount the insured pays out of pocket for covered care before the insurer begins paying, which keeps small claims out of the system and lowers premiums.

The share of covered costs the insured pays after the deductible is met, usually a percentage, while the insurer pays the rest up to any out-of-pocket cap.

Rules deciding which of two health plans pays first when a person is covered by both, so combined payments never exceed the actual charges.

A managed care plan providing care through contracted doctors and hospitals, usually requiring a primary care physician and paying little or nothing for out-of-network care.

A managed care plan that pays more when members use contracted providers but still pays part of the cost for out-of-network care, generally without referral requirements.

Coverage that replaces part of a worker's earnings when illness or injury prevents working, typically paying a percentage of income for a stated benefit period.

The waiting time at the start of a disability or long-term care claim before benefits begin, working much like a deductible measured in days.

Coverage that helps pay for nursing home care, assisted living, or home health aide services when a person can no longer perform daily activities independently.

The state-issued authority a person must hold to sell, solicit, or negotiate insurance in New Mexico; transacting insurance without one is illegal.

An insurer's formal notice to the state that it authorizes a licensed producer to act for it, required before the producer may submit business for that insurer.

The legal obligation of a producer to hold money belonging to clients or insurers in trust and to handle it honestly and only for its intended purpose.

Mixing client or insurer funds with the producer's personal or business money, which is prohibited because it makes tracking trust funds impossible.

Offering part of a producer's commission, or anything else of value, to a buyer as an inducement to purchase insurance, which is an illegal unfair trade practice.

Persuading a policyholder to drop existing coverage using misleading or incomplete comparisons, usually to sell a replacement policy, which is prohibited.

The official who heads New Mexico's Office of Superintendent of Insurance and enforces state insurance laws, issues licenses, and adopts regulations.

A statutory entity funded by insurers that pays covered claims of policyholders of insolvent life and health insurers, within dollar limits set by law.

Ongoing course credits a licensed producer must complete during each renewal cycle to keep the license active and stay current on rules and products.