CII Certificate in Insurance - Financial Protection (R05) 2025 – 400 Free Practice Questions to Pass the Exam

A level term assurance policy is usually the most suitable for covering an interest-only mortgage of £100,000 because it provides a death benefit that remains constant throughout the term of the policy. This means that if the policyholder passes away during the policy term, the beneficiaries would receive the specified sum assured, which would equate to the outstanding mortgage balance, ensuring that the mortgage can be repaid in full.

With interest-only mortgages, borrowers are responsible for paying only the interest during the mortgage term, with the principal amount being paid at the end of the term. Therefore, having a policy that maintains a level payout is crucial, as it ensures that the full mortgage amount is covered if the policyholder dies unexpectedly.

Other policy options may not align as well with the needs of covering an interest-only mortgage. Whole life assurance, for instance, is designed for lifelong coverage and accumulates cash value, which may not be necessary for this specific need. Reducing term assurance policies are tailored for repayment mortgages, where the payout decreases over time to match the liability, making them unsuitable for an interest-only mortgage. Term life insurance offers straightforward coverage but does not define the specificities necessary to ensure mortgage coverage aligns systematically with the outstanding balance, especially one that is constant over