How Does Family Income Benefit Work?

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In these uncertain times, it’s worth thinking about what would happen if you or your spouse were to pass away. I know it’s morbid, but aside from making a will have you thought about how you will manage financially? It’s no good burying your head in the sand. It’s something we have considered carefully. We both have life insurance that pays out a lump sum so that the mortgage is covered which seems to be the standard, but is there another way?

There is more to choose from than just standard life insurance now. Normal life insurance will give you a lump sum to pay off some of your mortgage or help with finances if you rent, but what about when that runs out? If you have young children you may need more security than that.

We’re going to be talking about Family Income Benefit in this article, so you can decide whether it is something you would consider when looking at the different options of life insurance policies for your family.

What is Family Income Benefit?

Family Income Benefit is different from other life insurance policies, in that it’s a type of life insurance that pays out a regular monthly or annual income, depending on your policy. Why consider it? Here are some of the benefits:

  • It’s a tax-free income for your dependents
  • It’s one of the best value ways to protect against death or serious illness
  • You can take it out alongside a lump sum Life Insurance policy that’s designed to pay off the mortgage
  • A regular income is easier for your loved ones to manage and means they don’t have to worry about dealing with a lump sum which can be overwhelming and easily mismanaged
  • Your payments can start after you or a loved one is diagnosed with a serious illness

If you’re not sure whether Family Income Benefit is the right option for you, or you would like to know more, seek advice from experts like LifeSearch.

You can choose how long you want the policy to run for, for example, do you want security whilst the children are at home? You can set the term to suit you and your family. As soon as you start paying into the policy, the term starts, so if you set it for 20 years and you died a year into it, the payouts last for 19 years. If you died 15 years into it, the payments last for five years. I think it’s a great option to run alongside a mortgage protection plan or critical illness cover. It works very well as a stand-alone if you don’t own a property but you know that the dependents left would struggle to manage on their own.

What do you think about Family Income Benefit? Would you consider taking out a policy?

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March 18, 2020
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