Advising on Protection Products Flashcards
6 cards from real CEMAP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Advising on Protection Products flashcards as text
What is the primary purpose of Mortgage Payment Protection Insurance (MPPI)?
Answer: To cover monthly mortgage payments for a limited period if the borrower is unable to work due to accident, sickness, or unemployment
MPPI provides temporary cover for monthly mortgage payments if the borrower cannot work due to accident, sickness, or involuntary unemployment.
How does decreasing term assurance work and why is it commonly recommended alongside a repayment mortgage?
Answer: The sum assured decreases over the term to broadly match the reducing mortgage balance, providing cost-effective cover
Decreasing term assurance provides a declining sum assured that roughly tracks the reducing balance of a repayment mortgage, making it an efficient and affordable way to cover the outstanding debt.
What is critical illness cover and how does it complement mortgage protection?
Answer: It pays a lump sum on diagnosis of a specified critical illness, which can be used to repay the mortgage or cover costs during recovery
Critical illness cover pays a tax-free lump sum upon diagnosis of a specified serious illness (such as cancer, heart attack, or stroke), which can be used to clear the mortgage.
What is the difference between indemnity-based and benefit-based income protection policies?
Answer: Indemnity-based policies pay based on actual earnings loss, while benefit-based policies pay a pre-agreed fixed amount regardless of actual earnings at claim time
Indemnity policies assess the actual income loss at the time of claim, while benefit policies pay the pre-agreed amount regardless of what the policyholder is earning when they claim.
Why might an adviser recommend level term assurance for an interest-only mortgage?
Answer: Because the outstanding balance on an interest-only mortgage remains constant throughout the term, requiring a constant level of cover
With an interest-only mortgage, the capital balance does not reduce over the term, so level term assurance maintaining a constant sum assured is more appropriate than decreasing cover.
What is the adviser's duty regarding protection advice during the mortgage advice process?
Answer: The adviser must assess the client's protection needs, discuss relevant products, and document the client's decision whether or not to proceed
MCOB requires advisers to consider the client's protection needs as part of the mortgage advice process and to record any discussion and the client's decision.