R05 Group income protection: free practice questions

1. Question 1 of 5

   Under most group income protection schemes, to whom is the claim benefit paid by the insurer?

   Option A: Directly to the employee by bank transferOption B: To the employee's pension scheme as a contributionOption C: To the employer, who pays the employee through payrollOption D: To HMRC, which then pays the employee

   Show answer

   The answer is C: To the employer, who pays the employee through payroll

   Group IP benefit is paid to the employer, which is the policyholder, and passed to the employee as salary under PAYE.

   Why the other options are wrong

   A

   Benefit goes to the employer, which is the policyholder, not straight to the employee.

   B

   Benefit isn't paid to the pension scheme.

   D

   HMRC doesn't pay group IP benefit.

2. Question 2 of 5

   Why is the deferred period under group income protection normally 26 weeks?

   Option A: Because HMRC requires it for tax reliefOption B: Because group schemes cannot pay benefit in the first yearOption C: To match approximately the 28-week Statutory Sick Pay periodOption D: To align with the State Pension age

   Show answer

   The answer is C: To match approximately the 28-week Statutory Sick Pay period

   A 26-week deferred period roughly matches the 28 weeks of Statutory Sick Pay, so the scheme picks up when SSP and employer sick pay are ending.

   Why the other options are wrong

   A

   HMRC doesn't require a 26-week deferred period.

   B

   Group schemes can pay in the first year, after the deferred period.

   D

   The State Pension age isn't relevant to the deferred period.

3. Question 3 of 5

   What trend has emerged in group income protection claim periods, and why?

   Option A: Benefit periods extended to age 80, following changes to State Pension ageOption B: Benefit periods shortened to one month, to cut administrationOption C: Limited claim periods, such as five years, to control costs as job changes riseOption D: Unlimited benefit periods, to attract and keep younger members of staff

   Show answer

   The answer is C: Limited claim periods, such as five years, to control costs as job changes rise

   Rising costs, poor claims experience and more frequent job changes have led many employers to cap claims at around five years, which reduces premiums.

   Why the other options are wrong

   A

   Benefit periods haven't been extended to 80.

   B

   One-month benefit periods would be far too short.

   D

   The trend is towards limited periods, not unlimited ones.

4. Question 4 of 5

   How do exclusions under group income protection typically compare with individual policies?

   Option A: Group policies tend to have fewer exclusions, though some jobs may have their ownOption B: Group policies always exclude all pre-existing conditions permanentlyOption C: Group policies exclude all mental health conditionsOption D: Group policies have exactly the same exclusions as equivalent individual policies

   Show answer

   The answer is A: Group policies tend to have fewer exclusions, though some jobs may have their own

   Group schemes tend to have fewer exclusions, or none as standard, although there may be specific exclusions for some occupations. Practice varies between insurers.

   Why the other options are wrong

   B

   Group schemes don't always exclude pre-existing conditions permanently.

   C

   Group schemes don't automatically exclude mental health conditions.

   D

   Group exclusions are usually fewer than individual ones.

5. Question 5 of 5

   An employer takes out cover to meet the extra costs of a key employee's long-term absence. How are the benefits received by the employer normally treated for tax?

   Option A: As a trading receiptOption B: As tax-free capital receiptsOption C: As a benefit in kind for the key personOption D: As a chargeable gain

   Show answer

   The answer is A: As a trading receipt

   Key person income protection compensates the business, for example for lost profits, and can have a higher maximum benefit. Benefits received are taxable as a trading receipt.

   Why the other options are wrong

   B

   Key person benefits aren't tax-free capital; they're taxed as trading receipts.

   C

   The benefit goes to the business, not the employee, so it isn't a benefit in kind.

   D

   Benefits aren't chargeable gains; they're taxed as trading receipts.

R0 Exam Prep is an independent revision tool. It is not produced, endorsed by or affiliated with the Chartered Insurance Institute (CII). Questions and explanations are original. Use it alongside the official study text. About R0 Exam Prep