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

Buildings insurance is a mortgage condition protecting the lender's security, while contents insurance protects the borrower's possessions — together they provide comprehensive home protection.

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

Income protection policies typically exclude pre-existing conditions, self-inflicted injuries, substance abuse-related claims, and do not pay during the initial deferred period.

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

Family income benefit pays a regular income to the family from the date of the policyholder's death until the policy term expires, rather than a single lump sum.

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

The adviser must assess total financial needs including mortgage, household bills, and living costs, minus any existing provisions such as employer sick pay or state benefits.

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

The deferred period is the waiting time between becoming unable to work and receiving benefit payments. Longer deferred periods reduce premiums because the insurer pays out for shorter periods.

CeMAP - Certificate in Mortgage Advice and Practice Practice Test

CeMAP - Certificate in Mortgage Advice and Practice Practice Test

CeMAP Advising on Protection Products 3