Confused by different types of life insurance? 3 proven ways family income benefit can protect you
If you’re looking to protect your loved ones, you may be confused by the different types of life insurance available. With dozens of insurers in the market and a wide choice of policies, finding the right cover for you can be tricky.
Family income benefit is one option that is easy to overlook. While you’ve probably thought about “term assurance” protection, family income benefit can be a useful and cost-effective way to ensure that your family are protected should the worst happen.
As family income benefit experts, we can help you to find the right cover at the right price. Read on to find out:
- What is family income benefit?
- Is family income benefit likely to be right for me?
- How do I get a family income benefit quote?
You’ll also discover three different types of life insurance you should consider if you want to protect your loved ones.
Family income benefit offers cheap and effective protection
Family income benefit is a type of term life insurance. It is designed to provide regular financial support to your family if you die or you are diagnosed with a terminal illness.
Rather than paying a lump sum, as a traditional term assurance policy would, family income benefit typically pays out the sum assured as a monthly income.
Receiving life insurance as a monthly income has many benefits:
- It eases the burden of bills. The monthly income can be used to pay mortgage/rent, utility bills and other regular expenses
- It’s easy for your loved ones to budget as they know exactly what income they will receive every month
- Monthly payments are tax-free
- Premiums are guaranteed for the term of the policy
- An indexation option is normally available. This means that you can choose for the benefit (and your premiums) to increase every year in line with rises in the cost of living.
One of the main reasons why family income benefit can be a great choice compared to different types of life insurance is because the payout is paid as income rather than a lump sum.
While a lump sum can be useful – for example, to pay off a mortgage – it can be difficult to calculate how much cover is required to provide for your family’s financial needs over a period of time. Your family also need to manage the lump sum to ensure it provides support for as long as they need it.
A regular income instead of a lump sum can be easier to manage, and to help your family to budget for regular expenses.
Note that most family income benefit policies do allow your loved ones, at any time, to switch from a monthly benefit to a reduced lump sum.
It’s important to note that, like other term assurance policies, family income benefit has no cash-in value. And, if the policyholder is still alive at the end of the term, the cover simply ends.
An example of how family income benefit works
You decide you want the peace of mind that your family will receive financial support if you pass away.
You calculate that your family would need a monthly income of £2,000 to be comfortable financially if you died. You also decide that you’ll need the cover in place for 15 years.
If you died five years into the policy, your family would receive a tax-free income of £2,000 a month for the next 10 years.
If you died 10 years into the policy, your family would receive a tax-free income of £2,000 a month for the next five years.
If you die after the 15-year policy term, no claim could be made.
Family income benefit is ideal if you have young children
Is family income benefit right for you?
There are lots of different scenarios where family income benefit could be a cost-effective and valuable option.
If you have young children
As the name suggests, family income benefit can be a great choice if you have young children.
If you are diagnosed with a terminal illness, or you die, family income benefit can help to protect and maintain your family’s lifestyle by paying for things such as the mortgage/rent, childcare, and utility bills.
Your family know that there will be a regular income coming in for a fixed period, enabling them to budget and to maintain their standard of living. It can ease the financial pressure on your loved ones should the worst happen.
If you’re a single parent
If you’re a single parent, you may want to ensure that you provide financial support for your child if something happens to you.
Family income benefit will help to secure your child’s future by providing their new guardian with a regular monthly income. This can help to cover their day-to-day expenses such as food, clothes, and school supplies.
If you are a full-time carer
Family income benefit can also be an excellent choice if you have become your loved one’s full-time carer.
Putting this protection in place means that, if you are no longer around, there is a monthly income available to pay for things such as private home care visits or to help towards paying the utility bills.
3 different types of life insurance that could be perfect for you
1.Level term assurance
Level term assurance is a simple and straightforward way to protect your loved ones. If you die within the policy term, your beneficiaries will receive a lump sum payout.
For example, you might take out a £200,000 level term insurance policy over a term of 25 years.
2.Decreasing term assurance
Decreasing term assurance is normally used to protect a repayment (capital and interest) mortgage.
Here, the amount of cover reduces year on year so, if you die towards the end of the term, your loved ones will receive a lower payout than if you died early on.
3.Family income benefit
As we have seen, family income benefit provides a monthly income to your loved ones from the date of your death to the end of the policy term.
It helps your family to budget as they know they can rely on a guaranteed, tax-free income for a fixed period.
Mix and match different types of life insurance to get the right cover for you
Of course, many of our customers take out more than one type of cover.
For example, you may decide to take out decreasing term assurance to ensure your mortgage is repaid, and family income benefit to ensure there’s financial support available to your family if you die.
We can help you to build a protection plan that works for you and your loved ones.
Talk to us to find cheap, effective protection
We’re life insurance experts and so can help to find the right protection for you. We work with dozens of the UK’s leading insurance companies, which means we can find the perfect cover.
And, as we are an independent broker with access to the whole of market, we can find you the best deal possible.
Get in touch with one of our life insurance experts to find out more about how family income benefit and the different types of life insurance can provide the peace of mind you need.
Are you making these 7 mistakes with your life insurance?
October 20, 2021
5 practical money steps you should take now if you’re self-employed
October 13, 2021
Life Insurance Payouts Explained
October 10, 2021
3 proven ways family income benefit can protect you
October 7, 2021
Discounted Isle of Man/Channel Islands group life insurance
September 29, 2021
10 health apps that can help you manage your wellbeing
September 23, 2021