R05 Short-term versus long-term cover: free practice questions

1. Question 1 of 5

   Which type of cover should generally be considered first when making protection recommendations, and why?

   Option A: Short-term policies, as they are cheaper and easier to buyOption B: Health cash plans, as they have no exclusions at allOption C: Long-term policies such as IP and CIC, as they give the fullest coverOption D: PPI, as it covers all of the client's debts and bills in one policy

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   The answer is C: Long-term policies such as IP and CIC, as they give the fullest cover

   Long-term policies offer the most comprehensive cover and should generally be the first option. Short-term cover still has a place, for example for unemployment or short-term needs.

   Why the other options are wrong

   A

   Short-term cover is cheaper and easier, but less comprehensive, so it isn't usually the first choice.

   B

   Health cash plans do have exclusions, and they cover far less.

   D

   PPI covers specific debts for a limited time, not all debts.

2. Question 2 of 5

   Which of the following is NOT an advantage of short-term protection policies?

   Option A: Modest cost compared with long-term coverOption B: Quick and easy application with little underwritingOption C: Premiums and terms guaranteed for the life of the policyOption D: Cover for periods of involuntary unemployment

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   The answer is C: Premiums and terms guaranteed for the life of the policy

   Short-term policies can be terminated or repriced at renewal, so terms are not guaranteed. Their advantages are ease of application, modest cost and unemployment cover.

   Why the other options are wrong

   A

   Modest cost is an advantage of short-term policies.

   B

   Quick and easy application is an advantage of short-term policies.

   D

   Cover for unemployment is an advantage of short-term policies.

3. Question 3 of 5

   What are the main disadvantages of long-term protection policies compared with short-term ones?

   Option A: They do not cover sicknessOption B: They never pay for more than two yearsOption C: They can be cancelled by the insurer at any renewalOption D: Extensive underwriting and potentially high cost

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   The answer is D: Extensive underwriting and potentially high cost

   Because the insurer's risk is high and cover comprehensive, long-term policies involve extensive underwriting and can be expensive.

   Why the other options are wrong

   A

   Long-term policies such as IP do cover sickness.

   B

   Long-term policies can pay for many years, not just two.

   C

   Long-term policies can't be cancelled by the insurer at renewal; that's their strength.

4. Question 4 of 5

   When advising on PMI, what is a key risk of moratorium underwriting that the adviser should explain?

   Option A: It always takes longer than full underwritingOption B: It removes all excessesOption C: It may result in effectively permanent exclusionsOption D: It is only available for comprehensive plans

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   The answer is C: It may result in effectively permanent exclusions

   Full underwriting may take longer, but moratorium underwriting can lead to effectively permanent exclusions for conditions needing ongoing treatment or check-ups.

   Why the other options are wrong

   A

   Moratorium underwriting is usually quicker, not slower.

   B

   It doesn't affect excesses.

   D

   It isn't limited to comprehensive plans.

5. Question 5 of 5

   Carys has a strong employer sick pay scheme and generous IP, but is worried about being made redundant in the next year or two. Which cover would best fill the gap?

   Option A: A whole of life policy written under a discretionary trustOption B: Short-term cover that includes unemployment, such as ASUOption C: Long-term care insurance to fund future care home feesOption D: More critical illness cover on top of her existing policy

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   The answer is B: Short-term cover that includes unemployment, such as ASU

   Her long-term sickness needs are met. Unemployment is not covered by IP or CIC, but short-term policies such as ASU or MPPI can include unemployment cover.

   Why the other options are wrong

   A

   Whole of life cover in trust meets needs on death, not a gap caused by redundancy.

   C

   Long-term care insurance funds care later in life, not redundancy.

   D

   More critical illness cover doesn't address the redundancy risk she's worried about.

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