Insurable interest, underwriting, the application and policy delivery are covered in the national basics guides. This guide covers the New Mexico statutes on these topics (NMSA 1978, 59A-18) and the state's life insurance buyer's guide rule.

Insurable interest

• When a person insures another person's life or body, the policy is valid only if benefits are payable to the insured or the insured's estate, or to someone with an insurable interest at the time the contract is made (NMSA 1978, 59A-18-4(A)). For life insurance, the interest must exist at the start, not at death.
• Parties to an agreement to buy or sell a business interest or corporate shares have an insurable interest in each other's lives for that agreement (NMSA 1978, 59A-18-4(D)).
• A life policy is valid without insurable interest when a charitable, benevolent, educational or religious institution is irrevocably named as beneficiary and the insured signs the application (NMSA 1978, 59A-18-5(A)).
• Property insurance works differently: the insured needs an insurable interest at the time of loss (NMSA 1978, 59A-18-6).

Consent and the application

• An individual life policy generally requires the insured to apply for it or consent in writing. Exceptions include a spouse insuring the other spouse, insurance on minors, and family policies (NMSA 1978, 59A-18-8(A)).
• No one but the applicant may change the application without the applicant's written consent. The insurer may add only clearly labeled administrative notes (NMSA 1978, 59A-18-9).
• A false statement in an application defeats recovery only if it materially affected the insurer's acceptance of the risk or the hazard it assumed (NMSA 1978, 59A-18-11(C)).
• On written request, the insurer must provide a copy of a reinstatement or renewal application within 15 days. If it doesn't, it can't use that application as evidence (NMSA 1978, 59A-18-11(A)).

Buyer's guide (13.9.5 NMAC)

The life insurance buyer's guide goes to the prospective buyer before the initial premium is accepted. If the policy has an unconditional refund provision of at least 10 days, the guide may be delivered with the policy instead (13.9.5.9(A) NMAC).

Common exam traps

• Life: insurable interest at the time the contract is made. Property: at the time of loss.
• Business buy-sell parties have an insurable interest in each other.
• A charity named irrevocably as beneficiary needs no insurable interest, but the insured signs the application.
• Written consent of the insured is required except for spouses, minors and family policies.
• Buyer's guide before the first premium, or with the policy if there's a 10-day free look.