CII R05 Life Insurance Products 2

Question 1

What happens at a premium review on a unit-linked whole of life policy if the fund value is insufficient?

Accepted Answer

The policyholder may need to increase premiums or accept a reduced sum assured

Answer

At a premium review (typically every 10 years), the insurer assesses whether the fund value is sufficient to maintain the current level of cover. If fund performance has been poor, the policyholder may face increased premiums or a reduced sum assured to keep the policy in force.

Question 2

A convertible term assurance policy gives the policyholder the right to:

Accepted Answer

Convert to a whole of life or endowment policy without further medical evidence

Answer

A convertible term assurance allows the policyholder to convert to a permanent form of cover (whole of life or endowment) without providing further medical evidence. This is valuable if the policyholder's health deteriorates during the term, as they can secure lifelong cover at standard rates.

Question 3

An over-50s plan is a type of whole of life policy that typically:

Accepted Answer

Offers guaranteed acceptance with no medical underwriting

Answer

Over-50s plans are non-underwritten whole of life policies that guarantee acceptance regardless of health. They typically have a moratorium period (often 12-24 months) during which only accidental death is covered. The sum assured is often modest and may be less than total premiums paid if the policyholder lives for a long time.

Question 4

A gift inter vivos policy is specifically designed to cover which liability?

Accepted Answer

The potential inheritance tax liability on a lifetime gift that falls within the seven-year rule

Answer

A gift inter vivos policy covers the potential IHT liability on a lifetime gift (potentially exempt transfer) if the donor dies within seven years. The sum assured decreases over the seven-year period in line with taper relief, reflecting the reducing IHT liability as time passes since the gift was made.

Question 5

Which of the following statements about renewable term assurance is correct?

Accepted Answer

The policyholder can renew the policy at the end of the term without further medical evidence, but at a higher premium reflecting their attained age

Answer

Renewable term assurance gives the policyholder the guaranteed right to renew the policy at the end of each term without further medical evidence. However, the premium on renewal will be recalculated based on the policyholder's attained age at that point, meaning premiums increase with each renewal.

CII R05 Practice Test

CII R05 Practice Test

CII R05 Life Insurance Products 2