CeMAP Advising on Protection Products 3

Question 1

What is the purpose of buildings and contents insurance in the context of mortgage advice?

Accepted Answer

Buildings insurance protects the property structure (required by lenders), while contents insurance protects personal belongings — both form part of comprehensive home protection advice

Answer

Only buildings insurance is relevant to mortgages

Answer

Contents insurance is a mortgage requirement

Answer

Neither is relevant to the mortgage advice process

Question 2

What are the key exclusions a client should be aware of in a typical income protection policy?

Accepted Answer

Common exclusions include pre-existing medical conditions, self-inflicted injuries, drug or alcohol-related conditions, and claims within the deferred period

Answer

There are no exclusions in income protection policies

Answer

Only age is an exclusion factor

Answer

Exclusions only apply in the first year

Question 3

How does family income benefit differ from standard life insurance?

Accepted Answer

Instead of a one-off lump sum, it pays a regular tax-free income to dependants from the date of death until the end of the policy term

Answer

It pays a larger lump sum than standard life insurance

Answer

It only covers the policyholder's spouse

Answer

It is more expensive than standard term assurance

Question 4

What factors should an adviser consider when recommending the appropriate level of income protection cover?

Accepted Answer

The client's total essential expenditure including mortgage, bills, living costs, and any existing cover or sick pay entitlements

Answer

Only the mortgage payment amount

Answer

Only the client's current salary

Answer

The maximum amount the insurer will cover

Question 5

What is the significance of the deferred period in an income protection policy?

Accepted Answer

It is the waiting period between the start of incapacity and when benefit payments begin, with longer deferred periods resulting in lower premiums

Answer

It is the period after the policy ends when cover continues

Answer

It is the time taken to process a claim

Answer

It refers to the cooling-off period after purchasing the policy

Question 6

What is the relevance of the Insurance Act 2015 to mortgage protection policies?

Accepted Answer

It reformed the duty of disclosure for consumers and businesses, replacing the duty of utmost good faith with a duty of fair presentation for business insurance and consumer-friendly rules for personal policies

Answer

It only applies to commercial insurance

Answer

It set minimum levels of life insurance cover

Answer

It banned insurance companies from selling protection products through mortgage brokers