Family Income Benefit Insurance
Family Income Benefit Insurance
Family Income Benefit Insurance Solutions
A Family Income Benefit policy provides financial security for your loved ones, similar to life insurance. However, instead of a lump sum, this policy ensures your family receives regular monthly payments if you pass away or are diagnosed with a terminal illness. These payments help cover daily living expenses, allowing your family to maintain their lifestyle during challenging times.
As whole-of-market insurance brokers, we compare policies across the industry to find competitive deals tailored to your needs. Our friendly team is here to guide you through the options and help you choose the best terms for your circumstances.
How is Family Income Benefit Different from Life Insurance?
Family Income Benefit and Life Insurance share similarities, but they serve distinct purposes:
These policies are often set up together, as they complement one another. A Family Income Benefit policy focuses on maintaining your family's monthly budget, covering essentials like food, utilities, and school fees.
- Life Insurance Provides a lump sum payout, often used to pay off a mortgage or other large debts.
- Family Income Benefit Offers monthly payments to cover everyday expenses, ensuring ongoing financial support for your family.
Why Would You Need a Family Income Benefit Policy?
This policy is ideal for families with dependents who rely on a primary earner's income. In the event of your passing, it ensures your spouse or partner receives regular payments to provide for your children until they are self-sufficient (typically around 21 years old).
Family Income Benefit offers:
- Financial support to cover daily expenses like food, utilities, clothing, and education.
- Stability and security for your loved ones during a stressful and life-changing time.
- Peace of mind, knowing your family can maintain their lifestyle without additional financial worries.
Why the Cover Reduces Over Time
Family income benefit is a decreasing term assurance, and understanding the mechanism explains both its low cost and where it can fall short.
The monthly benefit itself does not fall. What reduces is the number of payments remaining, because the income runs from the date of a claim to the fixed end of the policy term and no further.
A claim in year two of a twenty-year policy pays out for eighteen years. The same claim in year eighteen pays for two. The total paid therefore falls steadily across the term, and premiums are lower than a lump-sum policy because the insurer's maximum exposure shrinks every month.
That structure fits the need it was designed for remarkably well. A family's dependency on an earner is greatest while children are young and reduces as they approach independence. The cover follows the same curve.
Where it fits less well is a need that does not reduce — a fixed inheritance tax exposure, or funeral and estate costs. Those call for a level lump-sum policy alongside, not instead.
How the Benefit Is Paid, and the Tax Position
On a valid claim the insurer begins paying the agreed amount at the agreed frequency, normally monthly, and continues until the end of the policy term.
Benefits are normally paid free of income tax. They are the proceeds of a life policy rather than earnings, which is why a family income benefit figure compares favourably against gross salary rather than against take-home pay. Confirm the position for your own circumstances, as tax treatment depends on them and can change.
Most insurers offer commutation — the option to take the remaining payments as a discounted lump sum instead of an income. It is useful where a family's priority at the point of claim turns out to be clearing the mortgage rather than funding monthly costs. Because the sum is discounted for early receipt, it is worth less than the payments would have totalled, and it is a decision to take with advice rather than reflexively.
Ask whether commutation is available before the policy is written. Not every contract includes it, and it cannot be added later.
Writing It in Trust
A policy left outside a trust pays into the estate. That means waiting for probate before anything reaches the family, and it means the proceeds form part of the estate for inheritance tax.
Probate routinely takes months. A policy bought specifically to replace a monthly income, paying nothing for the first six months after a death, has failed in the one job it existed to do.
A trust fixes both problems. The proceeds pass directly to the named beneficiaries, generally without waiting for probate and generally outside the estate for inheritance tax.
Trusts are normally provided free by the insurer at the point of application, and completing one at outset takes minutes. Setting it up later is possible but more involved. There is very little reason not to do it at the start.
Options Worth Adding
Waiver of premium
maintains the policy if you are unable to work through illness or injury. Cover bought to protect a family is worth little if it lapses during the very period the household income has stopped.
Guaranteed insurability
allows cover to be increased on defined life events — a new child, a house move, a significant rise in the mortgage — without further medical questions. Health changes over a twenty-year term, and this option preserves the ability to increase cover when your health might otherwise prevent it.
Indexation
raises the benefit each year in line with inflation. A fixed monthly figure agreed today buys materially less in fifteen years, and the point of the cover is to sustain a standard of living rather than a number.
Terminal illness benefit
is normally included as standard and pays on diagnosis where life expectancy is under twelve months, rather than making the family wait.
Each adds to the premium. Waiver and indexation are the two most often worth the cost.
How Much Does Family Income Benefit Insurance Cost?
The cost of Family Income Benefit depends on several factors, including:
Our experienced advisors will assess your circumstances and provide a tailored quotation that fits your needs and budget.
At Bradgate FS we aim to make choosing and applying for a mortgage, protection, loan or insurance as stress-free as possible.
Taking action today can make a difficult time slightly easier for your loved ones should the unexpected happen. Our dedicated team of whole-of-market insurance advisors will help you find the best Family Income Benefit Insurance policy to suit your family's needs.
Contact us today for a consultation and ensure your family's financial future is protected.
- Your age and overall health.
- Your lifestyle (e.g., smoker or non-smoker).
- The length of the policy and level of cover required.
- The number of dependents you need to provide for.
Common questions
How long do payments continue for?
Payments typically continue until your children are self-sufficient, often set to end when they reach 21 years old, depending on the policy terms.
Can I have Family Income Benefit alongside Life Insurance?
Yes, Family Income Benefit is often arranged as a complementary policy to Life Insurance, ensuring both lump-sum and monthly financial support for your family.
What expenses can the monthly payments cover?
The payments can be used for a variety of expenses, such as household bills, food, education costs, and other living expenses.
Is this policy only for families with children?
While primarily designed for families with dependents, anyone looking to provide ongoing financial support for loved ones can benefit from this policy.
Can I adjust the level of cover over time?
Yes, many policies allow adjustments to the level of cover as your circumstances change, such as having more children or reducing debts.
Related
Important information
This is a protection policy with no cash-in value at any time. Cover is subject to underwriting and to the terms and exclusions of the individual policy. If you stop paying premiums, cover will end.
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