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Family Income Benefit

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Family Income Benefit

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Family Income Benefit is another type of life insurance that is designed to offer the same cover and can cost you less. Most people will not be told about by their adviser Family Income Benefit or will simply never have heard about this type of cover.

 

What is Family Income Benefit?

A Family Income Benefit policy works in exactly the same way as any other life insurance product as it pays out a Tax Free payment on death. The main difference between Family Income Benefit and other life insurance policies is that this type of cover pays-out a regular income rather than a lump sum payment.

The main reason why Family Income Benefit is cheaper than other forms of life insurance is that this product has a lower chance of paying out the full amount of cover then the other life insurance products (e.g. Level Term and Decreasing Term). Put simply, the longer you live and continue to pay your premiums your potential pay-out will reduce in line with the years that have passed.

Why should I choose Family Income Benefit?

There is no particular reason why a Family Income Benefit should be considered any better or worse than Level Term insurance other than how you want to receive your pay-out. A Family Income Benefit policy will allow your family and loved ones to continue to live as they would have done before knowing that they have a guaranteed income to a certain point.

Generally a Family Income Benefit policy is used for young families with dependent children to provide a cheaper alternative to Level Term (Family Protection) insurance. Some advisers would recommend Family Income Benefit as a cheaper alternative if full cover was unaffordable.

Our team of expert advisers will explain the difference between the different types of cover to help you to decide whether Family Income Benefit is more suitable for you. Where Level Term protection is not affordable or considered to be slightly more than required then we would generally recommend looking at Family Income Benefit as a cheaper alternative.

Can I have Critical Illness Cover with Family Income Benefit?

Most insurance providers will offer Critical Illness Cover as part of a Family Income Benefit policy in the same way that it can be added to Level Term or Decreasing Term cover. The same principle would apply in the event of a claim and the Critical Illness Cover element of the Family Income Benefit policy would provide an income which would reduce in line with the amount of years past.

There are a number of options as an alternative to adding Critical Illness Cover to your Family Income Benefit policy. Critical Illness Cover can also be bought as a stand-alone cover if you do not feel that is sufficient in a Family Income Benefit style policy. Speak to your adviser to find out more about how this works and to compare prices to see which works best for you.

Is Family Income Benefit cheaper than Life Insurance?

It is true that premiums for a similar amount of Family Income Benefit to Life Insurance will be lower but this does not necessarily mean that it is just cheaper. The main reason why Family Income Benefit premiums are lower than Level Term cover is that the pay-out towards the end of the term will be less and the cover is paid as an income.

If you were to claim on a Family Income Benefit policy in the early years then the payments received would be greater than in the latter years. A Family Income Benefit policy is just another way to ensure that your family and loved ones are financially secure in the event of the loss of an income to your household.

How much does Family Income Benefit cost?

The cost of Family Income Benefit directly relates to the same elements as any other form of Life Insurance, such as:

  • Age
  • Smoker status
  • Height / Weight
  • Sum assured
  • Term (years)
  • Health / Occupation / Extreme sports

Family Income Benefit is also cheaper in your younger years than it is later in life so worth considering earlier than later. Most people will consider any form of life insurance, including Family Income Benefit later in life when premiums will be higher.


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Can I get Family Income Benefit with a pre-existing medical condition?

Underwriting for Family Income Benefit is exactly the same as other types of Life Insurance and will depend on:

  • Health (e.g. Pre-existing medical conditions, family history, smoker status etc.)
  • Occupation (e.g. Hazardous, working at heights, Offshore etc.)
  • Extreme / Professional sports (e.g. High risk, extreme, airborne etc.)

A Family Income Benefit policy is underwritten differently by each insurance provider and decisions can vary dramatically depending on which provider you approach. Our team of Family Income Benefit experts know the underwriting criteria for all leading insurance providers and it is our job to make sure that we approach the right one for you and your circumstances.

How much Family Income Benefit cover do I need?

Because a Family Income Benefit pays out a regular income rather than a lump sum it is important to consider your ongoing living expenses / cost of living. Most people will want to cover the major outgoings, such as:

  • Mortgage / Rent payments
  • Bills (e.g. Electricity, Gas, Council Tax, TV, Phone etc.)
  • Childcare costs (e.g. Nursery, childminder, school fees etc.)
  • Travel costs (e.g. Car, fuel, road tax etc.)
  • Other (e.g. Holidays, Clothing etc.)

Once you know which of the regular monthly costs you would want to cover then you should be able to easily calculate how much you would like your Family Income Benefit policy to provide.

 

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