NMLAHIP - New Mexico Life Accident and Health Insurance Producer

Question 21: A policyowner pays unusually large premiums into a new life insurance contract during its first several years, funding it far faster than a traditional level-premium schedule would require. Which federal tax test determines whether this overfunding causes the contract to be reclassified as a modified endowment contract?

The exclusion ratio calculation

The transfer-for-value rule

The seven-pay test

The required minimum distribution rule

Question 22: An annuitant begins receiving fixed monthly payments from a nonqualified annuity contract funded entirely with after-tax dollars, and each payment blends together a return of the money she originally put in with newly earned investment gain. Which calculation determines what portion of each payment is free of income tax?

The seven-pay test

The transfer-for-value rule

Required minimum distribution rules

The exclusion ratio

Question 23: An employer provides one hundred thousand dollars of group term life insurance coverage to a valued employee at no cost to that employee, and federal tax law excludes the first fifty thousand dollars of this coverage from the employee's income. How is the coverage above that fifty-thousand-dollar amount treated?

Imputed as taxable income to the employee

Excluded entirely from the employee's income

Deducted from the employee's future benefit

Taxed only if the employee later dies

Question 24: A woman purchases an annuity contract, pays every premium herself, and retains the right to make withdrawals, name a different beneficiary, or surrender the contract for its cash value at any time. Which party to the contract holds these rights of control?

The annuitant

The owner

The irrevocable beneficiary

The insurer

Question 25: During a particular phase of a deferred annuity contract, premiums that the owner has paid in earn interest and compound, growing the account value, but no income payments are being distributed to anyone yet. Which phase of the contract does this describe?

The annuitization period

The payout period

The accumulation period

The free look period

Question 26: A man owns a nonqualified deferred annuity and dies suddenly and unexpectedly during the accumulation period, before any income payments have begun and before he ever elected a payout option. Under the contract's terms, which named party is entitled to receive the remaining account value that the man had accumulated?

The owner

The annuitant

The insurer

The beneficiary

Question 27: A small business owner with a handful of employees wants a low-administration retirement plan funded entirely through employer contributions, with each eligible employee's contribution deposited directly into that employee's own individual retirement account rather than into a single pooled trust. Which plan type matches this description?

A simplified employee pension plan

A savings incentive match plan

A traditional defined benefit plan

A tax-sheltered annuity plan

Question 28: An annuity owner allows earnings inside her deferred annuity contract to accumulate year after year without withdrawing any funds, and she receives no annual tax statement reporting that internal growth as current income. What federal tax concept explains why this growth escapes current taxation?

Exclusion ratio treatment

Tax-deferred accumulation

Imputed income treatment

Return-of-premium treatment

Question 29: An annuity contract guarantees a stated minimum interest rate credited to the owner's account value each year, and the insurer, rather than the owner, bears the investment risk if the insurer's own general account portfolio actually performs poorly. Which type of annuity does this description best fit?

A variable annuity

An indexed annuity

A fixed annuity

A separate account annuity

Question 30: A policyowner takes a withdrawal from a life insurance contract already classified as a modified endowment contract, and the contract holds more gain than the withdrawn amount. Which two consequences does federal tax law attach to this withdrawal, assuming the policyowner has not yet reached age fifty-nine and one-half?

Basis-first recovery with no penalty

A full exclusion from gross income

Ordinary taxation spread over several years

Gain-first taxation plus an early penalty

Question 31: An employer pays the full premium for a group term life insurance plan covering its employees, structuring the plan to meet federal nondiscrimination and other qualification requirements. How does federal tax law generally treat the premiums the employer pays for this coverage?

Deductible as an ordinary business expense

Nondeductible as a personal expense

Deductible only above a stated threshold

Deductible solely for the owner's coverage

Question 32: A portion of a nonqualified annuity's account value represents the owner's own after tax premium contributions, meaning income tax was already paid on that money before it went into the contract, so it can later be returned to the owner without further income tax. Which term names this portion?

The taxable gain

The cost basis

The death benefit

The cash value

Question 33: A policyowner who has been certified by a physician as terminally ill withdraws a portion of his life insurance death benefit early, while he is still living, under an accelerated death benefit provision built into the contract. How does federal tax law generally treat this early payment?

It is taxed as ordinary income

It is taxed above the cost basis

It is excluded from gross income

It counts as imputed income

Question 34: A retiree deposits his entire retirement savings into an annuity contract and, under its terms, begins receiving regular income payments within about one payment interval of that deposit, skipping any extended savings phase. Which type of annuity does this describe?

A deferred annuity

A flexible premium annuity

A period certain contract

An immediate annuity

Question 35: A worker sets up an annuity through payroll deduction, contributing a different dollar amount from each paycheck depending on what her budget allows that month, gradually building the contract's accumulated value over several years. Which funding arrangement does this describe?

A flexible premium annuity

A single premium annuity

An immediate annuity

A period certain annuity

Question 36: A teacher employed by a public school district and an administrator at a qualifying tax-exempt charitable organization both want to defer part of their salaries into a tax-sheltered retirement plan designed specifically for employees of their type of employer. Which type of plan is available to both of them?

A simplified employee pension plan

A tax-sheltered annuity plan

A savings incentive match plan

A traditional defined benefit pension only

Question 37: A producer recommends that an elderly client replace her existing annuity with a new contract carrying a long new surrender charge period, without ever reviewing the client's age, financial situation, or need for ready access to her money. Which duty has the producer most clearly failed to meet?

The free look duty

The fiduciary duty to insurer

The suitability duty

The disclosure of commission duty

Question 38: A policyowner borrows against her whole life policy's cash value, using the policy itself as collateral, and receives the loan proceeds directly from the insurer. Assuming the contract is not a modified endowment contract and stays in force, how does federal tax law treat the loan proceeds she receives?

Fully taxable as ordinary income

Taxable only above the cost basis

Taxable as a policy dividend

Not currently taxable income

Question 39: An annuity payout option guarantees income for the annuitant's entire lifetime, but it also promises that if the annuitant dies before a stated number of years has passed since payments began, the remaining payments in that period continue to a named beneficiary. Which payout option does this describe?

Life with period certain

Straight life income

Joint and survivor income

Pure period certain

Question 40: Before recommending that a consumer purchase or exchange an annuity, a producer must reasonably gather and consider certain information about that consumer, including the consumer's financial situation, tax status, existing investments, and need for liquid funds. Which term names this category of gathered information?

The insurer's financial rating

The consumer's suitability information

The producer's commission schedule

The state guaranty fund limit

NMLAHIP New Mexico Life Accident and Health Insurance Producer - Set 3 - Part 2

Question 24: A woman purchases an annuity contract, pays every premium herself, and retains the right to make withdrawals, name a different beneficiary, or surrender the contract for its cash value at any time. Which party to the contract holds these rights of control?

Question 25: During a particular phase of a deferred annuity contract, premiums that the owner has paid in earn interest and compound, growing the account value, but no income payments are being distributed to anyone yet. Which phase of the contract does this describe?

Question 31: An employer pays the full premium for a group term life insurance plan covering its employees, structuring the plan to meet federal nondiscrimination and other qualification requirements. How does federal tax law generally treat the premiums the employer pays for this coverage?

Question 34: A retiree deposits his entire retirement savings into an annuity contract and, under its terms, begins receiving regular income payments within about one payment interval of that deposit, skipping any extended savings phase. Which type of annuity does this describe?

Question 35: A worker sets up an annuity through payroll deduction, contributing a different dollar amount from each paycheck depending on what her budget allows that month, gradually building the contract's accumulated value over several years. Which funding arrangement does this describe?

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