R05 Sources of protection: State and employer: free practice questions

1. Question 1 of 5

   Which of the following protection benefits might an employer provide?

   Option A: Home contents insuranceOption B: Pet insuranceOption C: Motor insurance for employees' family carsOption D: Death-in-service life cover

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   The answer is D: Death-in-service life cover

   Employee benefits can include sick pay or income replacement, death-in-service life cover, critical illness cover, pensions and private medical insurance.

   Why the other options are wrong

   A

   Home contents insurance isn't a protection benefit employers usually provide.

   B

   Pet insurance isn't a protection benefit.

   C

   Motor insurance for family cars isn't a protection benefit.

2. Question 2 of 5

   What is the main disadvantage of relying on employer-provided protection?

   Option A: Cover usually ends on leaving and can be reduced or withdrawnOption B: The employer pays some or all of the cost of coverOption C: Free cover limits reduce the need for underwritingOption D: Bulk buying can secure better terms and cheaper premiums

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   The answer is A: Cover usually ends on leaving and can be reduced or withdrawn

   The advantages are that employers bear some or all of the cost and negotiate better terms. The drawback is that cover almost certainly ends on leaving and may be reduced or withdrawn.

   Why the other options are wrong

   B

   The employer paying for cover is an advantage, not a disadvantage.

   C

   Free cover limits are an advantage, as they reduce underwriting.

   D

   Better terms from bulk buying are an advantage.

3. Question 3 of 5

   An employer pays for an employee's private medical insurance and critical illness cover. How is this treated for tax?

   Option A: The benefits are taxed as income when paid, but the premiums are not taxedOption B: The contributions are a taxable benefit in kind, and benefits are paid tax-freeOption C: Both premiums and benefits are tax-freeOption D: No tax applies to the employee, as the employer pays the premiums

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   The answer is B: The contributions are a taxable benefit in kind, and benefits are paid tax-free

   Employer contributions for CIC and PMI are taxable benefits in kind, with benefits paid tax-free. By contrast, employer-insured death-in-service and income replacement promises give no benefit in kind charge, and income replacement is taxed when paid.

   Why the other options are wrong

   A

   It's the premiums that are taxed, as a benefit in kind; the benefits are paid tax-free.

   C

   The benefits are tax-free, but the employer's premiums are a taxable benefit in kind.

   D

   Employer-paid PMI and critical illness premiums are taxable benefits in kind for the employee.

4. Question 4 of 5

   Under group schemes, underwriters usually offer 'free cover' on what condition?

   Option A: That the employer has more than 1,000 staffOption B: That employees pay the premiums personallyOption C: That employees are all under age 40Option D: That all eligible employees join the scheme

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   The answer is D: That all eligible employees join the scheme

   Free cover is the amount of benefit allowed without medical underwriting, usually provided that all eligible employees join.

   Why the other options are wrong

   A

   There's no fixed staff number such as 1,000 for free cover.

   B

   Free cover depends on everyone eligible joining, not on who pays.

   C

   Free cover isn't limited to employees under 40.

5. Question 5 of 5

   How should State benefits be treated when assessing a client's protection needs?

   Option A: Treated as a full replacement for any private cover the client might buyOption B: Taken into account, though rarely enough to live on and often means-testedOption C: Ignored completely, as they are too complex and change too often to assessOption D: Only considered for clients above State Pension age

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   The answer is B: Taken into account, though rarely enough to live on and often means-tested

   State benefits would almost never be enough to live on, but they should be taken into account, especially as some are means-tested and could be affected by private cover.

   Why the other options are wrong

   A

   State benefits are rarely enough to replace private cover.

   C

   State benefits shouldn't be ignored; they form part of the picture.

   D

   State benefits matter for people of working age too.

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