R01 Life, health and payment protection products: free practice questions

1. Question 1 of 5

   What happens if the life assured survives to the end of a term assurance policy?

   Option A: The cover ends with no paymentOption B: The policy automatically converts to whole of lifeOption C: The policy pays a maturity valueOption D: The premiums paid are refunded

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   The answer is A: The cover ends with no payment

   Term assurance is pure protection with no savings element. If the life assured survives the term, cover simply ends with no maturity or surrender value.

   Why the other options are wrong

   B

   Conversion is an optional feature of convertible term, not automatic.

   C

   There's no maturity value on term assurance.

   D

   Premiums aren't refunded; they paid for the cover provided.

2. Question 2 of 5

   A family income benefit policy pays £15,000 a year over a 20-year term. The life assured dies after 7 years. What will the policy pay?

   Option A: £15,000 a year for the remaining 13 yearsOption B: A single lump sum of £300,000 straight awayOption C: £15,000 a year for the full 20 yearsOption D: A single lump sum of £105,000

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   The answer is A: £15,000 a year for the remaining 13 years

   Family income benefit pays the annual benefit from death until the end of the original term: 20 − 7 = 13 years at £15,000 a year.

   Why the other options are wrong

   B

   FIB pays an income, not a lump sum for the full term.

   C

   Payments run only for what's left of the original term.

   D

   £105,000 is 7 years' benefit, which relates to the time elapsed, not what's left.

3. Question 3 of 5

   A client chooses maximum cover on a flexible unit-linked whole of life policy. What is the main risk?

   Option A: The policy will then only pay out on the second death of a coupleOption B: The sum assured will automatically double at each policy reviewOption C: Units may later run short, so premiums must rise or cover fallOption D: The insurer can cancel the policy at any annual renewal date

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   The answer is C: Units may later run short, so premiums must rise or cover fall

   The cost of cover is met by cancelling units. At high cover levels the units can run out, so at reviews (usually after ten years, then every five) the client may need to pay more or reduce cover.

   Why the other options are wrong

   A

   Whether it pays on first or second death depends on how it's written, not on the cover level.

   B

   Cover doesn't increase automatically at review; the issue is whether it can be sustained.

   D

   Whole of life policies aren't cancelled by the insurer at renewal.

4. Question 4 of 5

   How does critical illness cover differ from income protection?

   Option A: CIC can only be sold as a standalone policy, never with life coverOption B: CIC pays only if the insured dies within a year of being diagnosedOption C: CIC pays a regular income for as long as the insured can't workOption D: CIC pays a lump sum on diagnosis, whether or not the insured can work

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   The answer is D: CIC pays a lump sum on diagnosis, whether or not the insured can work

   CIC pays a lump sum on diagnosis of a listed condition regardless of whether it stops the insured working. IP pays an income only while the insured can't work.

   Why the other options are wrong

   A

   CIC can be standalone or added to term, whole of life or endowment policies.

   B

   CIC pays on diagnosis; death isn't required.

   C

   A regular income while unable to work describes IP.

5. Question 5 of 5

   Which of the following is NOT typically excluded by a private medical insurance policy?

   Option A: Routine pregnancy and childbirth costsOption B: Ongoing treatment for chronic conditionsOption C: Inpatient surgery for a new acute conditionOption D: Cosmetic surgery chosen by the patient

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   The answer is C: Inpatient surgery for a new acute condition

   PMI typically covers inpatient tests and surgery for new acute conditions. Chronic conditions, cosmetic surgery, routine pregnancy and pre-existing conditions are common exclusions.

   Why the other options are wrong

   A

   Routine pregnancy is usually excluded.

   B

   Chronic conditions are usually excluded.

   D

   Elective treatments such as cosmetic surgery are usually excluded.

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