Why Family Income Benefit?
Family Income Benefit pays out a monthly income on death ensuring your loved ones are financially secure.
Provides peace of mind knowing those closest to you can maintain their living standards until they are self-sufficient.
Include critical illness insurance to provide a monthly income should you suffer a serious illness such as cancer.
Speak to our expert advisers or get an instant quote online comparing the UK’s leading insurers.
What does Family Income Benefit cover?
Family income protection pays out a set monthly income to your loved ones for the remaining term of the policy should the worst happen to you.
It provides a level of income for your loved ones to cover their essential outgoings until they reach an age where you would expect them to be self-sufficient, for instance your child’s 21st birthday.
Critical Illness Cover
An optional extra to include within your life insurance it protects you against the risk of serious illnesses such as heart attack, cancer and stroke, in total covering between 35-50 serious illnesses.
How does a Family Protection policy work?
You die during the term of your policy.
Your loved ones make a claim with the insurer providing your death certificate as evidence for the claim.
The insurer will pay a monthly income to the beneficiaries of the plan until the end of its term.
The benefit is paid out tax free and should have been set at a level which ensures your dependants can maintain their standard of living until they are self-sufficient.
Do I need Family Life Insurance cover?
Although life insurance is not an obligation it is certainly worth considering if you have a family who would struggle to meet their essential outgoings should you die.
What is the risk of passing away?
Based on ONS life expectancy data (2008-10), someone with a 25 year mortgage term would have the following chances of passing away before the loan is repaid:
30 years old
40 years old
50 years old
1 in 112
1 in 53
1 in 23
“21% of people have suffered long term ill health during their working life so critical illness cover is a very important policy addition.” Met Life 2012
Your Key Options
Choose your level of cover
It is important think about how much cover is enough, you should ask yourself what essential outgoings your loved ones would need to meet each month?
Choose your length of cover
This will often be aligned with the age you expect your children to be self sufficient, many consider this to be their childs 21st birthday.
Include critical illness cover
If you are looking to protect yourself against the risk of ill health you have the option to include critical illness cover or alternatively you could look at income protection insurance for a more comprehensive option.
Very helpful, advice was clear and there was not pressure at any stage to commit to purchasing a policy. Also the advice was tailored to my budget.Linda Ashford
What does Family Income Benefit cover?
Family Income Benefit is a form of life insurance which pays out a monthly income (rather than a lump sum) should the worst happen.
Where traditional level of decreasing life insurance are often used to pay off an outstanding mortgage in a single lump sum, a family income benefit policy is designed primarily to provide an income to help maintain your dependants standard of living until they reach an age at which they are likely to be self-sufficient.
If we assume a mortgage life insurance policy would have paid off the outstanding mortgage on death, a family income benefit would continue to provide enough income to meet the other essential outgoings such as food, utilities, school fees etc. until your children reach an age where they have flown the nest.
It is common to set-up a family income benefit plan in addition to any life insurance protecting the mortgage. The family income benefit would cover your essential outgoings minus the mortgage and will often be aligned to run until your youngest child is self-sufficient, at age 21 for example.
Should I consider this protection?
How would your dependants meet their essential outgoings if you were no longer around?
If you are unsure how these essential outgoings would be met or believe significant hardship would be required to meet these bills it is sensible to look at ways you can protect your dependants standard of living.
Family income benefit can ensure your loved ones are not met by these stresses during difficult times by providing them with a monthly income to meet their essential outgoings until they reach an age where they are able to meet these through their own means.
How much does it cost?
Due to the way in which family income benefit policy is structured paying a monthly income for the remainder of the policy term should a claim arise it is the most cost effective form of life insurance.
As with any life insurance policy there are a few key factors which affect the associated cost of the policy which include your age, smoker status and the level and length of cover.
A 30 year old non-smoking male taking out a £25,000 per year family protection policy running for 21 years will cost between £10 and £15 per month.
Including critical illness cover?
Most family income benefit plans do provide the option to include critical illness cover, this means that the policy would not only pay out if you were to die but also if you were to suffer one of a defined list of critical illnesses.
Including critical illness cover in your policy will increase your premiums because there is a much greater risk of you suffering a serious illness than there of you dying. The increase in premium will vary from insurer to insurer however given the increased risk incurred by the insurer the price increase will be significant.
NB. It is important to bear in mind that a number of family protection plans will only allow you to include critical illness cover if you opt for reviewable premiums.
If there is a real need for protection against ill-health we tend to recommend you consider an alternative product called income protection as it can often be a more cost-effective policy whilst providing a more comprehensive level of cover.
Single or joint plan?
You can opt to take out family income benefit on a single or joint basis. If neither yourself or your partner could survive without the others income to maintain the standard of living for the family you should consider protecting both parties.
Quick Tip – Although joint life cover can make sense for a couple taking out a joint repayment mortgage, in other situations such as protecting your children’s future you may find it more cost effective to consider two individual policies. With two separate policies you will end up with twice the cover for an additional 10%-15% in the monthly cost.
Writing the policy into trust?
Should you have a spouse then any benefit payment would be automatically paid across to them. If you would like to leave any benefit payment to someone other than your spouse you can use a trust
By placing the policy into trust any benefit payment upon a claim does not form part of the deceased’s estate and would not be subject to inheritance tax.
Do I need advice?
Drewberry Insurance have a team of independent life insurance experts on hand to help. We deal with these policies and their terms and conditions day in and day out and would be rather surprised if you had a question or scenario we had not come up against before.
At the end of the day we are here to help people, if you are unsure of anything or just want some general guidance please do not hesitate to pick up the phone, 0208 432 7333.
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