When you start a family your first natural instinct is to protect them and of course, the main way that comes to mind is to do so physically but there are other ways in which you can protect them especially if something happens to you. Being able to secure their future financially is imperative but with so many policy choices available what do you opt for? Life insurance is one choice but perhaps a family income benefit would be more suitable to you and your family?
What Is Family Income Benefit?
Family Income Benefit is a policy that helps to cover your family’s living costs with a monthly or annual payment and is one of the best value ways to protect against death or serious illness. It can often be taken out alongside a lump sum Life Insurance policy that’s designed to pay off your mortgage should anything happen to you or your partner.
When you take out your family income benefit policy, you can decide how long you’d like your policy – or ‘term’ – to last. As a parent, it’s probably a good idea to opt for this to be the length of time until your children are financially independent; so perhaps 18 years? You could also opt for it to last until your mortgage is paid off. It really is however it will work for you.
Family Income Benefit is slightly different to other similar products in that the risk to the insurer decreases with every year that there isn’t a claim. Let’s say for example you choose to have a 23-year term. If you claimed a month into this term, the payments would begin from the date of the claim all the way through to the end of the term. If you claimed 20 years into the term, the payments would again begin from the date of the claim but only payout for two years, because this is what is left of the term.
What’s The Difference Between Family Income Benefit and a Regular Life Insurance Policy?
Both are types of Life Insurance; Family Income Benefit pays out an ongoing income whereas Life Insurance pays out a lump sum.
Many people are attracted to family income benefit over (or as well as) products such as life insurance because of the regular payments it pays out once a relative becomes ill or passes away. Receiving the payout money in this way means that no one is left to deal with one large and overwhelming sum of money and budgeting becomes far more manageable.
What’s The Difference Between Family Income Benefit and Income Protection?
Family Income Benefit pays beneficiaries after the insured person passes away or is diagnosed with a serious illness. Income Protection protects you if you’re unable to work through illness or injury.
What About The Increase In Living Costs?
This would be something you would need to fully consider and it would be beneficial for you to opt for a policy that will rise with inflation. This will ensure that your family will be fully covered even if something happened to you say 25 years down the line.
Is Family Income Benefit Expensive?
Family income benefit is generally cheaper than life insurance but as with most insurance products, monthly premiums differ from person to person depending on personal and living circumstances. The price of premiums are based on your age, the annual income chosen as a payout and if you’ve ever smoked or currently have any existing health issues. Anything that will decrease life expectancy or be seen as a risk will increase your monthly insurance premiums in some way.
You can also look into getting a joint policy between you and your partner as this is usually the cheapest way to be covered by family income benefit. However, you will want to do a little research into this as having separate policies can also have their benefits. Having two single policies would result in two separate payouts if both of you were to be claimed for at some point in yours or your children’s lives. It’s certainly worth considering, providing it doesn’t make things too expensive.
Family Income Benefit is a great way of managing your finances whatever life may throw at you and ensuring that your family’s futures are financially protected.
*This is a collaborative post. For further information please refer to my disclosure page.
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