Friday Five Focus on Protection – 5 Questions in 5 Minutes – 2 Jan 2026

Friday Five Focus on Protection – 5 Questions in 5 Minutes Every Friday

What’s this all about?

Each week, we ask questions relating to one of these topics: Investments, Taxation, Pensions, Protection, or Regulation. This week, our Friday Five is relevant to Protection; this is useful as you prepare for the CII’s R05 exam. The challenge is for you to answer them in 5 minutes. Answers at the bottom of the page.

Questions

IMPORTANT! These questions relate to examinable tax year 2025/26, examinable by the CII until 31 August 2026.

1. Paul made a PET of £450,000 in June 2021. Assuming no annual allowances are available, if he died in September 2025, how much inheritance tax would the donee be liable for?
   1. £30,000
   2. £50,000
   3. £102,000
   4. £18,000

2. Income Protection is likely to be a higher priority than Critical Illness cover for most people because
   1. it has a shorter deferred period.
   2. income protection policies allow higher sums assured.
   3. an income protection plan covers significantly more medical conditions.
   4. the plan pays the benefits tax free.

3. Avril wants a low-cost policy that will help to pay for any medical care she requires. A disadvantage of a basic private medical insurance plan rather than a comprehensive policy is
   1. the cost of drugs required in treatment is not covered.
   2. treatment relating to substance abuse is unlikely to be covered.
   3. normal pregnancy will not be covered.
   4. there may be fairly low limits on the cost of treatment covered in one year.

4. Changes in society have meant that attitudes to insurance have changed too. The key background drivers to this change in attitude would NOT include
   1. the UK’s welfare state.
   2. technical developments.
   3. the growth of consumerism.
   4. an increase in client’s affordability.

5. Octavia Trading Ltd is setting up a group income protection scheme for their employees. The underwriters are likely to offer ‘free cover’ if all eligible employees
   1. are aged under 45 at the start of the scheme.
   2. join the scheme.
   3. are in occupational classes 1 and 2.
   4. have benefits provided below a stated maximum.

Answers

1. A; See R05 Study Text, Chp 5; Rationale: Paul died just over 4 years after making the £450,000 PET. The PET has therefore failed, and the amount in excess of Paul’s available nil rate band is subject to IHT. £450,000 – £325,000 = £125,000 @ 40% = £50,000. However, because Paul died between 4 and 5 years after making the PET, only 60% of the tax due is payable thanks to taper relief. £50,000 @ 60% = £30,000. The donee is therefore liable to IHT of £30,000.
2. C; See R05 Study Text, Chp 7; Rationale: Income protection is likely to be a higher priority than critical illness for most people because it covers significantly more medical conditions, including mental health and muscular-skeletal conditions that aren’t covered by critical illness policies.
3. D; See R05 Study Text, Chp 9; Rationale: Under a basic private medical insurance plan there is likely to be fairly low limits on the cost of treatment covered in any one policy year. If there are limits on a comprehensive plan, they will be much higher.
4. D; See R05 Study Text, Chp 1; Rationale: The changes in society have meant that attitudes have changed too. The main drivers for this are the UK’s welfare state, significantly changed family models, the growth of consumerism, technological developments, changes in attitude to personal risk and an increased range of options for other ways to spend income.
5. B; See R05 Study Text, Chp 6; Rationale: An underwriter is only likely to offer free cover if all eligible employees join the group income protection scheme. If everyone joins, chances are that the majority of them will be fit and well (because they are all in work), reducing the risk to the underwriter of offering free cover.

Grab the resources you need!

If you’re revising R05, applying what you’ve learned to exam-style questions is a useful next step. Our R05 E-Mocks are designed to reflect the structure and focus of the real exam – give our free taster a try to see how you perform in an exam-standard setting.

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