Free CII R05 Practice Questions: Protection Priorities and Solutions

CII means Chartered Insurance Institute. R05 is Financial Protection in the Diploma in Regulated Financial Planning. Use this focused CII R05 page as a short practice test for Protection Priorities and Solutions. The items are original Finance Prep sample exam questions built for scenario-based practice, not trivia, puzzle questions, official CII questions, copied live-exam content, or exam dumps.

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These are original Finance Prep practice questions aligned to this topic area. They are not official CII questions, copied live-exam content, or exam dumps. Use them to preview question style and explanation depth before continuing with topic drills, mixed sets, and timed mock exams in Finance Prep.

Question 1

Topic: Protection Needs, Priorities, and Solution Selection

A paraplanner is quantifying the lump-sum protection shortfall if Mark died today.

Family and needs:

• Mark is married to Aisha and they have two dependent children.
• Aisha would want the mortgage and unsecured debt repaid immediately.
• The adviser has allowed for funeral costs, an emergency fund, and a future education fund.
• Aisha would also need extra net household income of £18,000 a year. The adviser uses a real-terms capitalisation factor of 12.

Amounts to include:

• Outstanding repayment mortgage: £180,000
• Unsecured loan: £12,000
• Funeral costs: £6,000
• Emergency fund: £15,000
• Education fund: £30,000

Existing resources available on Mark’s death:

• Existing level term assurance: £150,000
• Death-in-service lump sum: £120,000
• Savings available to offset the need: £24,000

Ignoring tax and State benefits, what additional lump-sum life assurance is required?

• A. £150,000
• B. £339,000
• C. £189,000
• D. £165,000

Best answer: D

What this tests: Protection Needs, Priorities, and Solution Selection

Explanation: The capital assessment should include immediate capital liabilities and planned family needs, then add the capitalised value of any ongoing income shortfall. The immediate and future capital items total £243,000: mortgage £180,000, unsecured loan £12,000, funeral costs £6,000, emergency fund £15,000, and education fund £30,000. The income need is capitalised as £18,000 × 12 = £216,000. This gives a total need of £459,000. Existing resources available on death are the term assurance, death-in-service lump sum, and available savings: £150,000 + £120,000 + £24,000 = £294,000. The additional cover required is therefore £459,000 - £294,000 = £165,000.

• £150,000 understates the shortfall by not fully allowing for the capitalised income requirement and available resources together.
• £189,000 is the shortfall before deducting the available savings of £24,000.
• £339,000 deducts only the existing term assurance and ignores the death-in-service lump sum and available savings.

The total capital need is £459,000 and existing resources are £294,000, leaving a shortfall of £165,000.

Question 2

Topic: Protection Needs, Priorities, and Solution Selection

A protection adviser is carrying out an annual review for Priya and Sam, a married couple with two young children.

Current arrangements:

• Joint decreasing term assurance with critical illness cover matches their repayment mortgage.
• Priya’s income protection was set with a 26-week deferred period because her employer provided six months’ full sick pay.
• Sam has separate family income benefit in trust for Priya and the children.

Review updates:

• Priya has left employment and is now self-employed, with no employer sick pay or death-in-service benefit.
• The mortgage balance has reduced in line with the original repayment schedule.
• Sam’s salary and employer benefits are broadly unchanged.
• Priya asks for future meetings by video because of caring responsibilities.

What is the best conclusion from the review?

• A. Priya’s move to self-employment should trigger updated advice on her income protection and wider protection needs.
• B. The review should focus only on reducing cover because the mortgage balance has fallen.
• C. The main action is to rewrite Sam’s family income benefit because Priya now prefers video meetings.
• D. No updated advice is needed because the mortgage cover still matches the repayment mortgage.

Best answer: A

What this tests: Protection Needs, Priorities, and Solution Selection

Explanation: A protection review should identify material life, employment, health, family, debt, affordability and benefit changes that affect the client’s financial resilience. Priya’s employment status is the decisive change. Her existing income protection deferred period was selected to dovetail with employer sick pay, but she no longer has that support. She may also have lost group death-in-service or other workplace benefits. This means the adviser should reassess her income protection structure, emergency reserves, life cover needs and affordability. The request for video meetings is relevant to inclusive service delivery, but it does not by itself change the protection recommendation. A falling mortgage balance may confirm that existing decreasing cover remains suitable if it still tracks the debt.

• A mortgage balance reducing as expected does not create a new shortfall if the cover was designed to match it.
• A preference for video meetings should be accommodated where appropriate, but it is not the main protection-planning trigger.
• Reducing cover solely because the mortgage has fallen ignores Priya’s loss of employment benefits and possible income-protection gap.

Losing employer sick pay and death-in-service benefits materially changes the protection gap and the suitability of Priya’s existing arrangements.

Question 3

Topic: Protection Needs, Priorities, and Solution Selection

Alex and Sam are reviewing protection so that Sam receives capital if Alex dies.

Client facts:

• Alex and Sam live together but are not married or in a civil partnership.
• Alex is transgender and has asked that all communications use his current name and pronouns, with former details only used where necessary for underwriting or administration.
• Sam has a disability and also provides unpaid care for a parent, so meetings need to be planned around caring duties.

Capital need if Alex dies:

• Mortgage repayment: £170,000
• Survivor income fund: £80,000
• Funeral and emergency fund: £10,000

Existing death benefits:

• Employer death-in-service lump sum: £80,000, with Sam named on the expression of wish.
• Personal level term policy: £100,000, owned by Alex, not written in trust.
• Alex has no will.

Which interpretation is most appropriate for protection planning?

• A. The capital shortfall is £180,000 because death benefits cannot be directed to a cohabiting partner unless the couple marries or enters a civil partnership.
• B. Protection advice should be deferred because transgender status and disability are underwriting issues that make a specialist medical referral more important than cover design.
• C. There is a nominal £80,000 cover shortfall, and the £100,000 policy’s destination should be reviewed because cohabitation gives Sam no automatic entitlement; Alex’s transgender status, Sam’s disability and caring duties require inclusive handling, not assumptions about their need for cover.
• D. Existing cover fully meets the need because Sam should be treated as having the same automatic inheritance and bereavement rights as a spouse or civil partner.

Best answer: C

What this tests: Protection Needs, Priorities, and Solution Selection

Explanation: The estimated capital need is £260,000. Existing death benefits total £180,000, so the nominal shortfall is £80,000. However, the personal term policy is owned by Alex, is not in trust, and Alex has no will. Because Sam is a cohabiting partner rather than a spouse or civil partner, Sam should not be assumed to have automatic entitlement to Alex’s estate. Protection planning should therefore consider both the amount of cover and whether the benefit will reach the intended person, using suitable trust, nomination and will arrangements where appropriate. Inclusive advice also matters: gender reassignment and disability are protected characteristics, and caring duties may indicate vulnerability or practical access needs. These facts should shape communication, privacy, timing and support, not lead to assumptions that cover is unsuitable.

• Treating cohabitants as spouses or civil partners ignores the lack of automatic legal and tax protections for unmarried partners.
• Treating the gap as £180,000 ignores that existing cover may still be valuable, but its destination and structure need review.
• Deferring advice because of transgender status or disability confuses inclusive advice with inappropriate assumptions about eligibility or suitability.

The total capital need is £260,000 and nominal existing cover is £180,000, but cohabitation and the lack of a will or trust create a destination risk for the personal policy.

Question 4

Topic: Protection Needs, Priorities, and Solution Selection

A married couple are reviewing protection cover. They want the adviser to avoid recommendations that are likely to become unaffordable within the next year.

Monthly budget and proposed cover:

Known changes within 9 months:

• Fixed-rate mortgage ends, increasing monthly payments by £95.
• Childcare costs are expected to increase by £160 a month.
• No income increase is expected.

Which conclusion is best supported by these figures?

• A. The full package should be recommended because the current surplus exceeds the total premium by £20.
• B. The full package is currently within the monthly surplus, but it is not sustainably affordable after the known cost increases.
• C. Critical illness cover should be prioritised because it is the largest single premium in the package.
• D. All protection should be deferred until the mortgage and childcare increases have taken effect.

Best answer: B

What this tests: Protection Needs, Priorities, and Solution Selection

Explanation: Affordability should be assessed both at outset and over a realistic planning period where known changes are expected. The proposed premiums total £200 a month (£34 + £26 + £58 + £82), which fits within the current £220 available amount. However, this leaves only £20 a month of headroom. The known mortgage and childcare increases total £255 a month, so the package would become unaffordable unless income rises or other spending is reduced. A suitable recommendation would normally consider priorities, essential needs, lower-cost alternatives, benefit levels, deferred or staged cover, and review points rather than relying only on today’s surplus.

• Relying on the current £20 surplus ignores the known future cost increases.
• Deferring all cover may leave important protection needs unmet; affordability should be managed by prioritising cover, not automatically postponing everything.
• The largest premium is not automatically the highest priority; priority depends on the client’s needs, risks, existing cover, and budget.

The proposed premiums total £200, leaving only £20 now, and the known £255 increase in monthly costs would remove affordability.

Question 5

Topic: Protection Needs, Priorities, and Solution Selection

A protection adviser is meeting Priya, age 42, who is self-employed and has recently been diagnosed with multiple sclerosis. She has a mortgage, a financially dependent child, and a cohabiting partner. Priya says she is anxious about being declined for cover and finds long policy documents difficult to read because of fatigue and blurred vision.

Which approach is most appropriate when planning protection advice for Priya?

• A. Avoid discussing income protection or critical illness cover because her medical condition is likely to make these products unavailable.
• B. Ask her partner to make the decisions for her, as vulnerability means she should not be expected to assess policy terms herself.
• C. Recommend the cheapest life policy available and defer all trust or ownership issues until after underwriting is complete.
• D. Explore her protection needs and budget, offer information in an accessible format, check her understanding, and consider ownership or trust arrangements where suitable.

Best answer: D

What this tests: Protection Needs, Priorities, and Solution Selection

Explanation: Inclusive protection advice should not assume that a client with a health condition or disability cannot engage with advice or obtain suitable cover. The adviser should identify the client’s death, income, mortgage and family protection needs, then adapt the advice process so the client can participate effectively. That may include accessible documents, extra time, plain-language explanations, and checks that the client understands exclusions, underwriting outcomes and affordability. A health condition may affect underwriting, premium, exclusions or availability, but it should not stop the adviser from exploring suitable solutions. Ownership, nomination and trust arrangements are also part of appropriate protection planning, especially where a cohabiting partner or dependent child may need timely access to benefits.

• Ruling out income protection or critical illness at the outset makes an unsupported assumption and may leave a major income-risk need unaddressed.
• Letting the partner decide confuses support with loss of client autonomy; consent and understanding remain central.
• Choosing the cheapest policy is product-led and may ignore suitability, benefit access, exclusions, ownership and trust planning.

This combines needs-based protection planning with reasonable adjustments, understanding checks, affordability, and appropriate legal structuring.

Question 6

Topic: Protection Needs, Priorities, and Solution Selection

A protection adviser is reviewing Maya’s arrangements after several life events.

Recent changes:

• Maya and her spouse have had their first child.
• They have bought a home with a new joint repayment mortgage.
• Maya has left employment to become self-employed.

Current figures:

• Mortgage balance: £320,000 over 25 years
• Maya’s previous employer death-in-service benefit: 4 times salary, now ceased
• Maya’s previous salary: £55,000
• Existing personal life assurance on Maya: £100,000 level term assurance
• Existing income protection for Maya: none
• Estimated household income shortfall if Maya cannot work: £2,000 per month

Which interpretation is best supported by these facts?

• A. No review is needed until the next policy anniversary because the existing policy remains in force.
• B. Maya’s existing £100,000 life cover is adequate because the mortgage is jointly held and only half the debt needs to be considered.
• C. Maya’s life cover is short by at least £220,000 for the mortgage alone, and her move to self-employment creates a separate income protection need.
• D. The birth of a child mainly creates a need for private medical insurance rather than additional death or incapacity cover.

Best answer: C

What this tests: Protection Needs, Priorities, and Solution Selection

Explanation: Major life events can materially change protection needs. A property purchase usually creates or increases a debt-protection need, especially where the mortgage could not be cleared from existing cover. Here, Maya has £100,000 of life assurance against a £320,000 mortgage, leaving at least £220,000 uncovered before considering childcare, family income, or other expenses after the birth of a child. Her work change is also significant because she has lost employee benefits, including the former death-in-service benefit, and has no income protection despite a £2,000 monthly income shortfall if she cannot work. The best review would therefore consider both additional life assurance and income protection, subject to affordability and underwriting.

• Treating only half the joint mortgage as relevant may understate the surviving family’s need to keep the home.
• The birth of a child increases dependency and family-income needs; it is not mainly a private medical insurance issue.
• Waiting for a policy anniversary ignores the immediate effect of new debt, a new dependant, and loss of employee benefits.

The mortgage need is £320,000 less existing life cover of £100,000, and self-employment removes employer sick pay-style support.

Question 7

Topic: Protection Needs, Priorities, and Solution Selection

A married couple, Asha and Sam, are reviewing their protection priorities after Asha expanded her limited company. They have two children aged 6 and 9. Their adviser has established that essential household and business-continuity risks should be dealt with before discretionary estate planning.

Client and protection facts:

• Asha is the main earner and owns 100% of the company.
• Net monthly income: Asha £4,600; Sam £1,100.
• Essential household expenditure, including mortgage payments: £4,700 per month.
• Asha would receive one month of sick pay only and has no income protection.
• Joint repayment mortgage: £260,000.
• Existing joint term assurance assigned to the lender: £260,000 on first death only.
• Company bank loan: £140,000, personally guaranteed by Asha.
• No keyperson, shareholder, or business loan protection is in place.
• Their wills leave assets to the surviving spouse on first death.
• Potential IHT exposure on second death is estimated at £90,000.

Which interpretation is best supported by these facts?

• A. The priority should shift from further mortgage life cover to Asha’s income and business-continuity risks, because incapacity creates a £3,600 monthly household shortfall and the £140,000 personal guarantee is uncovered.
• B. The main priority is additional mortgage life assurance, because the mortgage is the largest single household liability.
• C. The main priority is personal accident cover for Asha, because it is likely to be cheaper than income protection.
• D. The main priority is whole of life assurance for IHT, because the estimated £90,000 tax exposure is not covered.

Best answer: A

What this tests: Protection Needs, Priorities, and Solution Selection

Explanation: Protection priorities depend on the consequences of each uninsured risk, not just the largest visible liability. The mortgage would be repaid on first death by the existing assigned term assurance, so more mortgage life cover is not the immediate gap. If Asha cannot work, household income falls to Sam’s £1,100 per month against essential spending of £4,700, leaving a £3,600 monthly shortfall after Asha’s short sick-pay period. Her company loan also has a £140,000 personal guarantee, so business failure could affect the family’s finances. The potential IHT exposure is relevant for later planning, but assets pass to the spouse on first death and the stated priority is essential household and business continuity.

• Extra mortgage life cover focuses on a debt already matched by the assigned policy.
• Whole of life assurance for IHT addresses an estate-planning issue, but it does not solve the immediate income and business risks.
• Personal accident cover is too narrow because it may not cover illness and does not address the business loan guarantee.

The mortgage death debt is already matched by assigned term assurance, while Asha’s incapacity and business loan guarantee create immediate uninsured risks.

Question 8

Topic: Protection Needs, Priorities, and Solution Selection

A paraplanner reviews a protection needs-analysis summary for Leanne, age 39, a single parent with two children aged 7 and 10.

Client facts:

• She earns £52,000 a year and is the only regular earner in the household.
• She has a £198,000 repayment mortgage with 22 years remaining.
• Existing decreasing term assurance of £198,000 is written in trust and matches the mortgage term.
• Her employer provides death-in-service cover of four times salary.
• Her employer sick pay is 13 weeks full pay, then statutory sick pay only.
• She has £3,000 in accessible savings and no income protection or critical illness cover.

Which protection gap should be treated as the most important priority?

• A. Additional decreasing term assurance to cover the mortgage again
• B. Long-term income protection with a deferred period aligned to the end of employer sick pay
• C. Whole of life assurance to provide an inheritance for the children
• D. Private medical insurance to reduce reliance on NHS treatment

Best answer: B

What this tests: Protection Needs, Priorities, and Solution Selection

Explanation: A needs-analysis summary should be used to identify the risk that would create the most serious uninsured financial shortfall. Leanne’s mortgage death need is already covered by decreasing term assurance, and death-in-service cover provides a further lump sum if she dies while employed. The more urgent gap is her inability to maintain household income if illness or injury prevents her from working. Her employer sick pay is short, statutory sick pay would be much lower than her earnings, and her savings would not support the family for long. Income protection is designed to replace part of earned income during long-term incapacity, usually after a chosen deferred period, so aligning the deferred period with the end of full sick pay is the most appropriate priority.

• More mortgage life cover duplicates an existing policy that already matches the mortgage amount and term.
• Whole of life assurance may support estate planning, but the immediate needs-analysis gap is income continuity for dependants.
• Private medical insurance may improve access to treatment, but it does not replace lost income or pay the mortgage during long-term incapacity.

Leanne’s largest unmet risk is loss of earned income through long-term incapacity, because she has minimal savings, limited sick pay and no income replacement cover.

Question 9

Topic: Protection Needs, Priorities, and Solution Selection

Amira is age 36, divorced, and has two children aged 7 and 10. She is the sole earner and can afford only one new protection arrangement immediately.

Client facts and estimates:

• Gross salary: £54,000 a year.
• Net monthly income: £3,200.
• Essential household expenditure: £2,650 a month, including a £950 mortgage payment.
• Savings: £3,000.
• Employer sick pay: 8 weeks full pay, then no contractual sick pay.
• Health: non-smoker with no material medical conditions disclosed.
• Mortgage: £185,000 repayment mortgage outstanding.
• Desired death provision: repay the mortgage, provide £2,000 a month for 11 years, and cover £5,000 funeral costs.
• Existing death cover: £216,000 death-in-service benefit and £100,000 level term assurance.
• Existing income protection or critical illness cover: none.

Ignoring inflation, investment returns, and State benefits, which is the best calculation-supported conclusion about her protection priorities?

• A. Her death-cover need is about £454,000, leaving a shortfall of about £138,000, but the most urgent new cover is income protection because illness or injury would quickly threaten essential expenditure.
• B. She does not need income protection as a priority because she is healthy and has 8 weeks of full employer sick pay.
• C. Her main gap is mortgage payment protection of £950 a month, because her savings can cover all other household expenses if she is unable to work.
• D. Her existing death cover is sufficient because it exceeds the mortgage, so the first priority should be critical illness cover for the mortgage balance only.

Best answer: A

What this tests: Protection Needs, Priorities, and Solution Selection

Explanation: Protection priorities should be based on the financial consequences of death, incapacity, illness, debts, dependants, and existing cover. Amira’s estimated death need is £185,000 + (£2,000 × 12 × 11) + £5,000 = £454,000. Existing death cover totals £316,000, so there is a £138,000 shortfall. However, she also has two dependent children, essential expenditure of £2,650 a month, only £3,000 savings, and employer sick pay that stops after 8 weeks. With no income protection, a period of illness or injury could create an immediate income gap and threaten the mortgage and household costs. Her good health may improve underwriting prospects, but it does not remove the need for cover.

• Treating death cover as sufficient because it exceeds the mortgage ignores the family income need for the children.
• Covering only the mortgage payment would not address food, utilities, childcare, and other essential spending.
• Good current health and short-term sick pay do not remove the risk of longer-term incapacity.

The death-cover shortfall is £454,000 less £316,000, and her limited sick pay, low savings, dependants, and no income protection make incapacity income the immediate priority.

Question 10

Topic: Protection Needs, Priorities, and Solution Selection

A small limited company has two equal shareholder-directors. Each works full time in the business and both are essential to maintaining customer relationships.

Current position:

• No keyperson cover is in place.
• No shareholder protection arrangement is in place.
• A business loan is supported by personal guarantees from both directors.
• Each director’s will leaves their shares to their spouse.

One director dies unexpectedly. What is the most likely consequence of the protection gap?

• A. The surviving director will automatically acquire the deceased director’s shares at market value under company law.
• B. The deceased director’s spouse will receive State benefits sufficient to replace the director’s business income and settle the business loan.
• C. The business loan will normally be written off because the death was outside the control of the company.
• D. The business may lose key income-generating capacity while the deceased director’s spouse inherits shares that the surviving director has no funded means to buy.

Best answer: D

What this tests: Protection Needs, Priorities, and Solution Selection

Explanation: Inadequate business protection can create several linked problems after the death of a key owner. The company may suffer an immediate loss of revenue, management skill, customer goodwill, or creditworthiness. If there is no keyperson policy, there may be no cash injection to stabilise the business. If there is no shareholder protection arrangement, the deceased owner’s shares may pass to a spouse or estate, leaving the family with an illiquid asset and the surviving owner without funds or a contractual route to buy the shares. Creditors may also become concerned, particularly where business borrowing depends on personal guarantees. State benefits are not designed to replace a business owner’s income or solve company succession and debt issues.

• Automatic transfer to the surviving director is not the normal outcome; shares usually pass under the will or intestacy unless an effective agreement says otherwise.
• Business debt is not usually written off merely because a guarantor or director has died; lenders may still pursue repayment under the loan terms and guarantees.
• State support is limited and does not provide a full replacement for business income or fund company ownership succession.

Without keyperson and shareholder protection, the business and the deceased’s family can both face financial strain and ownership uncertainty.

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