R05 Assessing and structuring life cover: free practice questions

1. Question 1 of 5

   If a borrower dies without life cover in place, how might an outstanding mortgage lender recover the loan?

   Option A: By transferring the debt to the borrower's employerOption B: The loan is written off automatically on deathOption C: From the deceased's estate or by selling the property securing the loanOption D: By claiming against the borrower's State bereavement benefits instead

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   The answer is C: From the deceased's estate or by selling the property securing the loan

   Most loans become repayable on death. Without life cover, the lender can recover the debt from the estate or by realising the secured asset, which may mean the family home has to be sold.

   Why the other options are wrong

   A

   Debts don't transfer to an employer.

   B

   Loans aren't written off on death; they're usually repayable from the estate.

   D

   Lenders can't claim a borrower's State bereavement benefits.

2. Question 2 of 5

   For which relationship is insurable interest automatically assumed when one person insures the life of the other?

   Option A: An adult child insuring a parentOption B: A parent insuring an adult childOption C: Spouses or civil partnersOption D: Two unmarried cohabiting partners

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   The answer is C: Spouses or civil partners

   Spouses and civil partners have an automatic insurable interest in each other. For anyone else it must be proved, and there is no automatic interest between generations such as parent and child.

   Why the other options are wrong

   A

   An adult child doesn't automatically have an insurable interest in a parent.

   B

   There's no automatic insurable interest between generations.

   D

   Unmarried partners don't have an automatic insurable interest; it must be proved.

3. Question 3 of 5

   Registered group life benefits have historically been limited by reference to a pension allowance. What is the level of the lump sum and death benefit allowance for 2026/27?

   Option A: £268,275Option B: £1,073,100Option C: £1,250,000Option D: £1,000,000

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   The answer is B: £1,073,100

   The lump sum and death benefit allowance is £1,073,100 for 2026/27, the same as the final lifetime allowance. Excepted group life policies are not subject to this limit.

   Why the other options are wrong

   A

   £268,275 is the lump sum allowance for tax-free cash in life, not the lump sum and death benefit allowance.

   C

   £1,250,000 isn't the current allowance; for 2026/27 the lump sum and death benefit allowance is £1,073,100.

   D

   £1,000,000 isn't the current figure; the allowance is £1,073,100.

4. Question 4 of 5

   Rhys is unsure how long his children will remain financially dependent on him. Which policy feature best addresses the risk that his term assurance ends too early?

   Option A: A terminal illness benefitOption B: A waiver of premium benefit on long-term sicknessOption C: A decreasing sum assuredOption D: A convertibility or renewability option

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   The answer is D: A convertibility or renewability option

   If the need might outlast the term, a convertible option allows conversion to whole of life regardless of health, and a renewable option guarantees the right to extend cover. A whole of life plan is another way to deal with this uncertainty.

   Why the other options are wrong

   A

   Terminal illness benefit doesn't extend the term of cover.

   B

   Waiver of premium keeps cover going during illness; it doesn't extend the term.

   C

   A decreasing sum assured makes the problem worse.

5. Question 5 of 5

   Under a guaranteed insurability option, which event would typically allow the sum assured to be increased without further medical evidence?

   Option A: Taking out a larger mortgage on moving homeOption B: A fall in the client's income after a job changeOption C: Changing car insurerOption D: Being diagnosed with a serious illness

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   The answer is A: Taking out a larger mortgage on moving home

   Typical trigger events include marriage, birth or adoption of a child, career progression, an inheritance, moving home or increasing a mortgage. The option must be used within the stated time limit, although missing one does not affect future options.

   Why the other options are wrong

   B

   A fall in income isn't a trigger; the options cover increases in need.

   C

   Changing car insurer isn't a trigger event.

   D

   A serious diagnosis isn't a trigger event; options are for life events that raise need.

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