NMLAHIP - New Mexico Life Accident and Health Insurance Producer

Question 1: Without owing any surrender charge, an owner takes out a limited portion of her deferred annuity's account value this year, an amount that stays within the yearly limit her contract allows before penalties would apply. Which contract feature allowed this withdrawal?

A bailout provision

A market value adjustment

A nonforfeiture option

A free withdrawal provision

Question 2: An individual opens a traditional individual retirement account and contributes earned income each year, and the account's investment earnings accumulate inside the account without generating an annual tax bill. Which federal tax treatment applies to eligible contributions and to the account's ongoing investment growth?

Deductible contributions, tax-deferred growth

Never deductible, growth taxed yearly

Always deductible, growth taxed yearly

Deductible contributions, tax-free distributions

Question 3: During the accumulation period of a nonqualified deferred annuity, interest credited to the account each year is not currently taxed to the owner, allowing the account to compound without current income tax until money is eventually withdrawn from the contract. Which tax treatment does this describe?

Tax free growth

Fully taxable growth

Tax deferred growth

Capital gains growth

Question 4: A policyowner surrenders his whole life policy for its full cash surrender value, which exceeds the total premiums he paid into the contract over the years, minus dividends already received. How does federal tax law treat the amount by which the cash value exceeds that adjusted basis?

Excluded entirely from gross income

Taxed as long-term capital gain

Taxed only if the insured later dies

Taxed as ordinary income

Question 5: A policyowner's variable annuity account value rises and falls along with the performance of the subaccounts she selected, rather than crediting a set guaranteed interest rate the way a fixed annuity would. Under this arrangement, who bears the investment risk on the account value?

The policyowner

The insurer

The state guaranty fund

The insurance producer

Question 6: Among the available lifetime payout options on an annuity, one produces the single largest periodic income payment of all the life contingent choices, but it stops entirely at the annuitant's death, leaving nothing further payable to any beneficiary, even shortly after payments began. Which option does this describe?

Life with period certain

Joint and survivor income

Straight life income option

Life with cash refund

Question 7: A retiree begins taking regular withdrawals from her traditional individual retirement account after reaching retirement age, having deducted every contribution she originally made to the account throughout her working years and letting the balance grow tax-deferred. How does federal tax law treat these retirement withdrawals?

Excluded entirely since she already retired

Taxed as long-term capital gain

Taxed only on the earnings portion

Taxed as ordinary income when withdrawn

Question 8: Financial professionals commonly recommend annuities to clients nearing or already in retirement because the product can convert accumulated savings into a systematic stream of periodic payments that the retiree cannot outlive, supplementing other sources of retirement income. Which primary use of annuities does this describe?

Providing lifetime retirement income

Providing pure death protection

Funding a mortgage

Replacing property insurance

Question 9: Each premium payment a policyowner makes into a variable annuity during the accumulation period purchases a certain number of a specific kind of unit, much like buying mutual fund shares, whose value fluctuates with the performance of the chosen subaccounts. Which term names these units?

Annuity units

Participation shares

Accumulation units

Separate account bonds

Question 10: An annuity payout option pays income for a specified number of years regardless of whether the annuitant is still living, and it carries no lifetime guarantee at all, meaning payments stop once the stated period ends even if the annuitant remains alive. Which payout option does this describe?

Life with period certain

Life only

Fixed amount option

Period certain only

Question 11: An annuitant selects a lifetime payout option and dies having received less in total payments than her original premium. Rather than paying the shortfall as one lump sum, the insurer continues sending periodic payments to her beneficiary until the full original premium has been paid out. Which option is this?

Life with installment refund

Life with cash refund

Fixed amount option

Period certain option

Question 12: Premiums paid into a certain type of annuity are invested in a portfolio of subaccounts resembling mutual funds, held apart from the insurer's other assets, so that performance and investment risk pass directly to the policyowner. Which account structure does this describe?

The general account

The separate account

The guaranty fund

The reserve account

Question 13: An individual contributes earned income to a Roth individual retirement account, choosing not to claim any current income tax deduction for the money she puts into the account. How does federal tax law characterize these contributions at the time they are made?

Deductible from current taxable income

Excluded from wages before contribution

Made with already-taxed, after-tax dollars

Matched dollar for dollar by the government

Question 14: A retirement plan maintains a separate individual account for each participant, crediting contributions and investment earnings to that account, and the eventual retirement benefit depends entirely on the account's accumulated balance rather than on any promised formula. Which type of qualified retirement plan best fits this arrangement?

A defined benefit plan

A group term life insurance plan

A nonqualified deferred compensation plan

A defined contribution plan

Question 15: A retiree annuitizes his nonqualified deferred annuity and begins receiving a level monthly payment for life. The exclusion ratio for his contract shows that a majority of each payment represents a return of his own cost basis rather than accumulated earnings. Which consequence follows for his income tax treatment?

Most of each payment is untaxed

The entire payment is untaxed

The entire payment is taxable

Only interest earned is untaxed

Question 16: A retiree just received a large lump sum retirement distribution, wants income to begin within the next month, and has no additional money available to contribute afterward. Which combination of funding method and payout timing best fits her stated need?

Flexible premium deferred annuity

Single premium immediate annuity

Single premium deferred annuity

Flexible premium immediate annuity

Question 17: When a deferred variable annuity converts from its accumulation period into its payout period, the insurer converts existing units into a fixed number of a different unit, multiplied each period by a value that floats with subaccount performance to set each payment. Which kind of unit results from this conversion?

Accumulation units

Participation units

Annuity units

Separate account shares

Question 18: An annuitant selects a lifetime payout option and dies only a short time after payments begin, having received in total less than the amount he originally paid into the contract. His beneficiary receives the shortfall as one single lump sum payment. Which payout option is this?

Life with installment refund

Life only

Joint and survivor

Life with cash refund

Question 19: An employee pays the entire premium for her own individual disability income policy using after-tax dollars, receiving no employer contribution and no tax deduction for the premiums paid. When she later becomes disabled and begins receiving monthly benefit payments under that policy, how does federal tax law treat those payments?

The benefits are received income-tax-free

The benefits are taxed as ordinary income

Only half the benefits are taxable

The benefits are taxed as capital gain

Question 20: An owner withdraws a sum of money from her nonqualified deferred annuity, and under the general tax rule for such withdrawals, that money is treated first as coming from the contract's earnings above the amount she originally paid in. How is that earnings portion taxed to the owner?

As long term capital gain

As ordinary income

It is entirely tax free

As a return of basis

NMLAHIP New Mexico Life Accident and Health Insurance Producer - Set 3 - Part 1

Question 1: Without owing any surrender charge, an owner takes out a limited portion of her deferred annuity's account value this year, an amount that stays within the yearly limit her contract allows before penalties would apply. Which contract feature allowed this withdrawal?

Question 4: A policyowner surrenders his whole life policy for its full cash surrender value, which exceeds the total premiums he paid into the contract over the years, minus dividends already received. How does federal tax law treat the amount by which the cash value exceeds that adjusted basis?

Question 5: A policyowner's variable annuity account value rises and falls along with the performance of the subaccounts she selected, rather than crediting a set guaranteed interest rate the way a fixed annuity would. Under this arrangement, who bears the investment risk on the account value?

Question 9: Each premium payment a policyowner makes into a variable annuity during the accumulation period purchases a certain number of a specific kind of unit, much like buying mutual fund shares, whose value fluctuates with the performance of the chosen subaccounts. Which term names these units?

Question 12: Premiums paid into a certain type of annuity are invested in a portfolio of subaccounts resembling mutual funds, held apart from the insurer's other assets, so that performance and investment risk pass directly to the policyowner. Which account structure does this describe?

Question 13: An individual contributes earned income to a Roth individual retirement account, choosing not to claim any current income tax deduction for the money she puts into the account. How does federal tax law characterize these contributions at the time they are made?

Question 16: A retiree just received a large lump sum retirement distribution, wants income to begin within the next month, and has no additional money available to contribute afterward. Which combination of funding method and payout timing best fits her stated need?

Question 18: An annuitant selects a lifetime payout option and dies only a short time after payments begin, having received in total less than the amount he originally paid into the contract. His beneficiary receives the shortfall as one single lump sum payment. Which payout option is this?

Question 20: An owner withdraws a sum of money from her nonqualified deferred annuity, and under the general tax rule for such withdrawals, that money is treated first as coming from the contract's earnings above the amount she originally paid in. How is that earnings portion taxed to the owner?

Need Guaranteed Results?