CII R05 FINANCIAL
PROTECTION PRACTICE
EXAM 2025-2026
COMPLETE 50Q
Question 1: A client wants insurance against the �nancial consequences of premature death. Which mechanism is fundamental to how life assurance deals with this risk?
Choices:
1) The client converts the risk into an investment return 2) The insurer eliminates the possibility of death occurring 3) The insurer pools similar risks and accepts a transfer of �nancial risk in return for premiums 4) The client retains the entire risk through personal savings Correct Answer: The insurer pools similar risks and accepts a transfer of �nancial risk in return for premiums Explanation: Life assurance transfers speci�ed �nancial risk to an insurer. Premiums from many policyholders are pooled so that claims arising among the insured group can be paid.Page 1
Question 2: Medical advances mean more people survive serious illnesses but may
be unable to work for long periods. Which protection planning implication is most directly associated with this trend?
Choices:
1) A reduced need for income protection and critical illness cover 2) A greater need to consider living bene�ts as well as death bene�ts 3) A greater reliance on short-term savings instead of insurance 4) A reduced need to review existing protection arrangements Correct Answer: A greater need to consider living bene�ts as well as death bene�ts Explanation: Longer survival after serious illness can create prolonged income loss and additional costs. This strengthens the need to consider living bene�ts such as income protection and critical illness cover, not just death bene�ts.Question 3: A client buys £300,000 of level term assurance for 25 years and chooses no indexation. If prices rise substantially over the period, what is the main e�ect on the policy bene�t?
Choices:
1) Its nominal amount falls but its real purchasing power is unchanged 2) Its nominal amount and real purchasing power both increase 3) Its real purchasing power increases because the bene�t is tax free 4) Its nominal amount stays the same but its real purchasing power falls Correct Answer: Its nominal amount stays the same but its real purchasing power falls Explanation: With level cover the stated sum assured remains £300,000. In�ation reduces what that �xed amount can buy, so the real value of the bene�t declines over time.Page 2
Question 4: A sole earner has a repayment mortgage and two �nancially dependent children. When assessing life assurance needs, which combination should normally be quanti�ed?
Choices:
1) Only the outstanding mortgage balance 2) The current market value of the family home and pension fund 3) Only the cost of replacing the earner's income 4) Capital liabilities and the family's future income shortfall
Correct Answer: Capital liabilities and the family's future income shortfall
Explanation: Protection planning should consider both capital needs, such as repaying debts, and continuing income needs for dependants. Looking at only one of these may leave a substantial protection gap.Question 5: A client has assets worth more than her liabilities, but most of her wealth is tied up in a private business and commercial property. She also supports a dependent partner. Why might life assurance still be appropriate?
Choices:
1) Life assurance is required whenever assets exceed the nil-rate band 2) Life assurance converts illiquid assets into tax-free pension income 3) Positive net worth always removes the need for life assurance 4) Life assurance may provide liquidity and support dependants without forcing assets to be sold quickly Correct Answer: Life assurance may provide liquidity and support dependants without forcing assets to be sold quickly Explanation: A positive net worth does not guarantee that cash will be available when needed.Life assurance can provide immediate liquidity for dependants and liabilities without requiring a rushed sale of business or property assets.Page 3