What is Family Income Benefit?
An important part of having a mortgage is making sure its protected should the worst happen. Many individuals have life insurance which will cover any outstanding mortgage payments in the event of a loss of one or more people responsible for the bills. For most of us however, there will be many more costs to consider in order to ensure bills such as council tax or utility bills are covered, as well as maintaining a standard of living.
This is where Family Income Benefit can help. Family Income Benefit is a term life insurance policy that pays a regular income to your dependents if you die during the policy term. Unlike other life insurance policies, Family Income Benefit does not pay a lump sum, but rather a fixed monthly or annual amount until the end of the policy term.
How does a Family Income Benefit policy work?
When you set up a Family Income Benefit policy, you’ll pay a monthly premium for the duration of your policy. This is a type of insurance policy whereby the insurance company would make a monthly tax-free payment to your family should you pass away during the policy period.
Like with any kind of insurance, you hope you’ll never need it, but if you were to pass away during the policy period, your family would benefit from regular payments supporting them to maintain their standard of living. For example, if you were to pass away 5 years into a 30-year policy, your family would receive 25 years of payments. This kind of insurance policy is often attractive to families with young children, where one partner is the main earner.
Why might a Family Income Benefit policy work for me and my family?
If you were to pass away during a policy term, Family Income Benefit can offer several advantages for your family. It can provide a steady and predictable income that can cover essential expenses, such as your mortgage, rent, bills, groceries, and education.
It may be a more affordable option, as it only covers the remaining years of the policy term. This means you can plan for this regular payment, knowing that at the end of the policy, the payments will cease. While life insurance can provide a larger amount of money, it may also cost more in premiums. For families with young children and bigger expenses, this could be an option to keep costs low while also protecting your family’s future.
However, Family Income Benefit may not be suitable for everyone. It has some drawbacks that you should consider before buying a policy. For example, it does not pay a lump sum that your family can use for other purposes, such as paying off debts, investing, or leaving an inheritance. There also may be a time where there is a further expense which has not been accounted for that would not be covered by the monthly payment.
How can I set up a Family Income Benefit policy?
When you are thinking about taking out a Family Income Benefit policy, you will need to consider how much your family will need each month to live if your income was no longer available. Your financial adviser can help you to calculate this.
Protecting your income and your family’s future is an important step in your financial planning journey. A financial adviser can help you to assess the best products for you.
Speak to an expert today about Family Income Benefit.