CII R05 Life Assurance Products 2

Question 1

What is the primary purpose of family income benefit (FIB)?

Accepted Answer

To pay a regular income to dependants for the remainder of the policy term following death

Answer

Family income benefit pays a regular income rather than a lump sum from the date of death to the end of the policy term, helping replace the deceased's earnings for dependants.

Question 2

How does an increasing term assurance policy work?

Accepted Answer

The sum assured increases over time, usually in line with inflation or at a fixed percentage

Answer

Increasing term assurance allows the sum assured to rise over the policy term to counter the effects of inflation, maintaining the real value of the benefit.

Question 3

What is a 'joint life first death' policy?

Accepted Answer

A policy that covers two lives and pays out on the first death of either insured

Answer

A joint life first death policy covers two people and pays the sum assured on the first death of either insured person, after which the policy ends.

Question 4

Which type of term assurance automatically renews at the end of each term without the need for fresh medical evidence?

Accepted Answer

Renewable term assurance

Answer

Renewable term assurance gives the policyholder the option to renew the policy at the end of each term without providing further medical evidence, though at rates reflecting the new age.

Question 5

What is the main risk to an insurer when offering guaranteed insurability options on life policies?

Accepted Answer

Anti-selection — only those whose health has deteriorated will exercise the option

Answer

Guaranteed insurability options allow policyholders to increase cover without medical evidence. This creates anti-selection risk as those whose health has worsened are more likely to use the option.

CII R05 Practice Test

CII R05 Practice Test

CII R05 Life Assurance Products 2