SCLAHIP - South Carolina Life Accident and Health Insurance Producer Exam

Question 1: An employer pays the entire premium for group term life insurance on its employees, and one employee is enrolled for coverage well above fifty thousand dollars. Which of the following describes how the cost of that coverage is treated for the employee?

All of the premium is taxable income

None of the premium is ever taxable

The employee may deduct the premium

Premium above the threshold is taxable income

Question 2: A federal law passed in 1974 protects participants in employee benefit plans and their beneficiaries by imposing fiduciary standards and requiring plan information to reach participants, the Department of Labor, and the Internal Revenue Service. Which law is described?

The Employee Retirement Income Security Act

The Uniform Simultaneous Death Act

The Fair Credit Reporting Act

The Social Security Act

Question 3: An employer with about seventy workers and no other retirement program lets employees defer part of their pay and is obligated to match those deferrals dollar for dollar within a stated range. Which of the following plans is being described?

A profit-sharing plan

A SIMPLE plan

A simplified employee pension plan

A defined benefit pension plan

Question 4: A client is told that her annuity credits interest tied to a stock market index, yet protects her principal from loss, and that no securities registration was needed to sell it to her. Which classification does this product fall under?

A variable annuity

A mutual fund contract

A separate account annuity

A form of fixed annuity

Question 5: The cash value inside a universal life policy has grown steadily for eleven years, and the policyowner has taken nothing out of the contract. He wants to know how that annual growth is treated while it stays inside the policy. Which statement is accurate?

Growth is taxed as earned each year

Growth is tax deferred inside the policy

Growth is permanently exempt from all tax

Growth is taxed at capital gains rates

Question 6: Two years before he died, an insured gave away every ownership right in his life policy to his adult daughter and kept nothing. The Internal Revenue Service still counted the death benefit in his gross estate. Which rule caused that result?

The incidents of ownership test

The transfer-for-value rule

Transfers within three years of death

The seven-pay premium limit

Question 7: An annuity owner dies during the accumulation period, and no living beneficiary is named anywhere on the contract. The insurer must still pay out the accumulated value that has built up. To whom are those proceeds paid in that situation?

To the owner's estate

To the annuitant automatically

To the insurer as unclaimed funds

To the producer who sold it

Question 8: A retiree hands an insurer a single lump sum from the sale of her business, and the insurer begins sending her monthly income one month later with no waiting years in between. Which type of annuity has this retiree purchased?

A flexible premium deferred annuity

A single premium deferred annuity

A single premium immediate annuity

A level premium deferred annuity

Question 9: An owner dies during the accumulation period of a deferred annuity, and the total premiums paid, minus the withdrawals already taken, come to more than the contract's current accumulated value. Which amount does the insurer pay to the named beneficiary?

The current accumulated value only

Nothing, since payments never began

The average of the two figures

Premiums paid less withdrawals, the greater amount

Question 10: An equity-indexed annuity credits interest linked to a stock market index, but the contract states that the credited rate for any year will not exceed a stated maximum no matter how far the index climbs. Which feature sets that ceiling?

The cap

The floor

The participation rate

The surrender charge

Question 11: A married couple wants annuity income to keep arriving for whichever spouse lives longer, so that the surviving spouse is not left without monthly payments when the first of them dies. Which of the following payout options best meets that requirement?

Joint life annuity

Straight life annuity

Fixed period option

Joint and survivor annuity

Question 12: A producer meeting with a prospective group client is asked which employers may offer their staff a tax-sheltered annuity arrangement under Section 403b of the Internal Revenue Code. Which of the following organizations is eligible to sponsor such a plan?

A public school system

A county sheriff's department

A family-owned retail chain

A publicly traded manufacturer

Question 13: An annuitant selects a payout option that promises the largest monthly check available but ends every payment at his death, even if he dies after receiving only one check and nothing at all passes to his family. Which payout option has this annuitant chosen?

Life with ten year period certain

Installment refund life annuity

Joint and survivor annuity

Straight life annuity

Question 14: Six years into a deferred annuity still inside its surrender period, an owner takes out a small share of the contract value and is charged nothing for it, although a larger withdrawal would have cost her a fee. Which provision explains that result?

The grace period provision

The reinstatement provision

The free withdrawal provision

The nonforfeiture provision

Question 15: A contract owner has been depositing premium into a deferred annuity for eleven years, and interest has been credited to the contract value each year, but no income payments have started. Which period of the annuity contract does this describe?

The annuitization period

The accumulation period

The payout period

The period certain

Question 16: A producer who already holds a life insurance license wants to begin selling variable annuities. Because the contract owner bears the investment risk on these products, they are regulated as securities as well. Which additional qualification must the producer obtain?

A property and casualty license

A surplus lines broker license

Federal and state securities registration

A separate account custodian license

Question 17: A client is moving her individual retirement account from one company to another and wants the funds sent straight from the old custodian to the new one, never passing through her hands. Which statement correctly describes that method?

It is limited to once every year

It must be completed within sixty days

It requires twenty percent withholding

It is a transfer with no limit

Question 18: A fifty-two-year-old policyowner takes a loan against a life policy that is a modified endowment contract and holds substantial interest earnings above his cost basis. He assumes the loan is tax free. Which of the following correctly describes the tax result?

Interest comes out first and is taxable

Loans from any policy are never taxable

Cost basis comes out first, untaxed

The loan is taxed at surrender only

Question 19: An annuitant has received annuity income for many years and has now recovered her entire cost basis through the excluded portion of each payment. She keeps receiving the same monthly amount. Which statement describes the tax treatment of these later payments?

They remain partly excluded from income

They become fully taxable ordinary income

They stop being reported to the insurer

They are taxed at capital gains rates

Question 20: A policyowner surrenders her whole life policy and receives a check for the entire cash value, which is larger than the total of every premium she ever paid. Her accountant must determine what portion of that payment is subject to income tax. Which answer is correct?

The entire check is taxable income

Nothing is taxable on a surrender

Only the premiums paid are taxable

The amount exceeding cost basis is taxable

SCLAHIP South Carolina Life Accident and Health Insurance Producer Exam - Set 3 - Part 1