Family Income Benefit
Family income benefit is a type of insurance that can be used as a way to protect loved ones. In the event of the death of a policyholder, this will give support to the family. Households will generally rely on the income of one or two family members to meet their everyday needs. If this income is suddenly lost, it can be very difficult. Family income benefit can be used to protect your family, including dependent children, by providing them with a regular income if you die within the set period of the policy.
How does this type of policy work?
The aim of this type of policy, which is known as term insurance, is to replace the lost income of the insured person who has died. The payments will generally be made monthly or annually via direct debit as a tax-free sum which will continue until the policy ends. Once the term of the policy expires, the cover no longer exists, and the payments will stop.
So, if you take out a 25-year policy and die after 10 years, your family will receive payments for the remaining 15 years of the term. It might also possible to add critical illness cover to some policies which will allow payments to start if the policy holder is diagnosed with a serious illness (for example, cancer). In this case, the policyholder does not need to die for a claim to be made.
What are the benefits of this policy?
This type of insurance is relatively cost-effective and can provide peace of mind. If anything were to happen to you, your family would still be supported, financially.
This type of policy can protect the children of the family by covering the costs of their upbringing before they become financially independent. The sudden loss of income from a parent who dies can result in great financial difficulties for a family. Family income benefit can provide an equivalent income for a specified period.
Such a policy can also become part of a divorce settlement to assist with childcare costs as maintenance payments in the event of death, something that is often not considered in these situations. The premiums to NOT have to be paid by the “life assured” (the person the policy is covering) but the life assured does have to be aware of, and agree to, the cover.
What will it cost?
The cost of each policy will depend on many factors:
- The level of income you want the policy to provide.
- How long you want the policy to run for.
- Your age, health and lifestyle.
- Whether you want the income level to remain constant or to rise each year (index-linked).
- Whether you want the policy to include a waiver of premium cover, which will meet the premium payments where you cannot pay them yourself because you cannot work (for example, due to illness).
- Whether you want a joint policy for a couple or 2 individual policies. Two policies will be slightly more expensive, but this option provides double cover if both people die during the term of their policies.
The first thing that you will need to determine is how long you will need cover for. This will depend on any children and their ages. You will need to decide whether you want the policy to cover only their school years or to go beyond that to cover university fees or to help with their living expenses. You also need to determine how much money the family needs on a monthly basis and to factor in inflation, which will increase living costs.
It is always advisable to speak to a professional adviser to ensure you have the right level of cover. Swift Mortgages has access to a wide range of insurances and protection policies.
Please contact us before making any decisions and we will help you find the most suitable protection for your situation.
Call us on 01525 309300 or 07903 302895 or send us a few details and we will be happy to talk through the options with you.