Family Income Benefit
Family Income Benefit provides a tax-free monthly benefit to your beneficiaries for the full duration of your term in the event of death or critical illness. Contact us to find out how to structure this into your plan.
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Family Income Benefit Insurance
Family Income Benefit Insurance is a policy that pays out a set monthly amount in the event of your death. Like other insurance policies, it’s typically a fixed term policy, but the payout is received monthly as opposed to a lump sum.
Some find it more straightforward to calculate the level of cover they need for family income benefit instead of a lump sum life insurance policy, by assessing what they need for their family to be financially secure on a monthly basis.
How Much Cover Do I Need?
Family income benefit is often calculated in line with your salary. If your take-home pay is hypothetically £2,500 per month, then most policies will be calculated to match this, for a fixed period of time.
If you were to take out a 20 year policy and pass away after 2 years, your family would receive the monthly payout for the remaining 18 years of the policy.
If you were to die 18 years into a 20 year policy, your family would receive the payout for the final 2 years until the policy ends.
Paying your mortgage - Family Income Benefit vs Term Assurance policies
Where family income benefit provides a monthly payout over a set period in the event of your death, a term life insurance policy is more designed to pay off a debt in a lump sum, usually a mortgage.
A decreasing term policy reduces the level of payout over time to reflect the reduced balance of the mortgage being paid off. A level term policy pays out the same amount regardless of when the claim is made within the policy term. Increasing term life insurance pays out an amount that increases over time, in line with inflation.
If you have a mortgage debt to be repaid, a policy like decreasing, level or even increasing term assurance could be more suitable as it pays the debt off as one lump sum – removing the worry of having to maintain the mortgage, even though the family income benefit provides the funds.
Paying off the mortgage early means you don’t pay mortgage interest on ‘future payments’, as this is accrued over time. It also removes the uncertainty that time can bring – such as changes to interest rates which can cause the cost of mortgage repayments to change.
Easier Money Management
One of the advantages of Family Income Benefit is the reduced hassle that comes with managing a lump sum payout. With a smaller, more regular income, it can be easier to manage money on a monthly basis, as opposed to ensuring a lump sum payment lasts for the required period of time.
This can be particularly comforting at a stressful time. If a claim needs to be made, it’s often a distressing time when the family experiences grief. Family Income Benefit allows the family to focus on supporting one another, instead of worrying about money issues.
Do I get taxed on family income benefit?
Family Income Benefit is paid tax free. This is why it’s important to calculate your monthly income on take-home pay, rather than gross salary to ensure you’re not overpaying on your premiums and receive a suitable amount of cover.
Leaving Your Family Income Benefit In A Trust
It’s possible to leave your Family Income Benefit payout in a trust. This leaves the income from the policy outside of your estate, meaning there are no delays in the payout due to probate. You can also be sure that the payout goes to the desired beneficiaries, either your spouse, or if you are a single parent, your children.
If you are looking to use Family Income Benefit to protect your children’s financial security, many choose to take out a policy that can protect their children until they’re financially independent. This is usually in their early 20’s.
Reputable Advice and Guidance
Family Income Benefit can be affordable and easy to arrange – however shopping around for insurance quotes and completing online quote applications can be time-consuming and confusing, so it’s best to let a professional adviser handle this for you.
So you could talk to us instead. We have a sound knowledge of the life insurance market and can help you choose a policy from one of the robust and reputable companies we have good relationships with. We’ll give you an impartial view of the companies we use to help you choose the right Family Income Benefit policy that will provide you with the right level of income should the worst happen.