Family Income Benefit is life assurance that rather than paying out a lump sum in the event of a claim pays a set monthly amount instead. So, unlike level term assurance that pays a set amount at any point in the term, or decreasing term assurance that pays out a reducing amount over a term, normally in line with a repayment mortgage, family income benefit pays a monthly figure from the point of the claim until the end of the policy term.
This type of insurance is usually put in place to cover the loss of income that would occur if a person was to die. So for example a family with dependents and a mortgage may decide to cover themselves with either level or decreasing term assurance to repay the mortgage in the event of a death but also to cover themselves for an amount equal to the net (after tax), household income.
Putting this type of protection can be of particular importance to a family with young children as a way of protecting the family lifestyle without the need for a surviving spouse having to return to work whilst the children are small by guaranteeing an income into the household for a set period of time.
Family income benefit can very often be a cheaper alternative for a person wishing to insure themselves with a lump sum equivalent over the same time scale. It also does not require beneficiaries to decide how to invest a lump sum of money so that it provides them with an income for any given period of time.
It is worth noting that depending on when a claim is made will affect the total amount that will be paid out by a family income benefit policy. So, for example if a person insures themselves over 20 yrs for £1500 a month and they die after 2 years of having the policy, then the beneficiaries will receive £1500 a month for the next 18 yrs. However, if a claim is made with one year remaining on the policy then the beneficiaries will receive the £1500 a month for 12 months only.
Many providers also include additional benefits included in your premium and at no extra cost, including terminal illness cover and accidental death cover. You can read more about these options by reading the “Key Facts Documents” that are produced when you choose a quote.
It is always worth taking the opportunity to discuss different scenarios with one of our insurance consultants to get an idea of the many options available and indeed their costs, so that you can decide on a plan that best suits your personal circumstances and budget. A plan with more than one layer of protection may well be cheaper than you think but the benefits received by the people who need it could be priceless.