In most households, bills, mortgage repayments and household spending is reliant on at least one regular salary coming in. But what if one of these main providers passes away, what happens then? This is where family income benefit comes in.
Family income benefit is different from other life insurance policies as it does not pay out a lump sum to the beneficiaries should the insured individual pass away. Instead, it provides a regular tax-free income to the beneficiaries, on either a monthly or quarterly basis, to cover household and living costs when the main earner is no longer around.
How does Family Income Benefit work?
When you take out a Family Income Benefit, you choose how long you would like your term to last. For example, young families can choose for this to be until the children are financially independent, no longer needing income payments.
Family income benefit slightly differs to other products, in that the risk to the insurer decreases with every year there is no claim. For example, if you choose to have a 23-year term and pass away when it begins, the payments would begin from the date of passing until the end of term – so for 23 years. If you pass away 20 years into the term, the payments would again begin from the date of passing and be paid out for 3 years.
Who is best suited to Family Income Benefit?
Family income benefit is ideal for new parents with young children looking for extra peace of mind and protection. By incorporating regular payments over a large lump sum payout means no one is left to deal with a large, overwhelming sum of money, such as with a traditional Life Insurance Policy. Losing a loved one is hard enough, without having to suddenly deal with a huge amount of finances. This method means money is made manageable and budgeting becomes simple.
How is Family Income Benefit different from Life Insurance and Income Protection?
With Term Life Insurance, it not only pays out a lump sum but it will also pay out the full amount no matter how far along into your term you are. With Family Income Benefit, the monthly instalment paid to the beneficiaries but each year there is no claim, less money overall will be paid out.
This insurance product then is not suitable for covering large costs, such as paying off a mortgage. This product is designed to cover only living costs but if you wished to cover all bases, you can take this out alongside a traditional Life Insurance Policy which will pay out a lump sum.
If Family Income Benefit sounds similar to Income Protection Insurance, you would be right in thinking this – they are, however, two very different products. The big difference is that Income Protection covers you if you become ill, injured or disabled and therefore are no longer able to work and earn money, albeit for the short term or the long term. Income Protection replaces your earnings so that you can still pay bills and get by. However, Family Income Benefit will not pay out for this, unless Critical Illness Cover is taken out alongside it, which covers you should you become seriously ill.
What can LifeSearch do to help?
Death is not something that anyone wants to think about or consider happening anytime soon, especially if you have just started a young family. However, protecting the ones you love is always worth thinking about. Family Income Benefit is a huge security blanket for many to ensure that family finances continue to tick over when you’re not around.
If you want to know more about Family Income Benefit, get in touch with our award-winning team for free advice and quotes from the UK’s leading providers. We’re here and happy to answer any question, no matter how big or small, to give you peace of mind.
This is a featured post on behalf of LifeSearch.