How does family income benefit work?
When securing a family income benefit policy, you define the desired income and duration for your loved ones. The insurer calculates the necessary monthly premium to provide that coverage.
Initially, assess the income required for your family's financial stability in the event of your death.
For instance, if your family needs £2,000 per month for the next 30 years upon your demise.
If you pass away in the first year, the insurer pays out £2,000 monthly for the entire 30-year policy.
iIf you pass away in year 25, your loved ones receive £2,000 monthly for the final years.
If you die after the policy term concludes, there won't be a monthly pay-out to your beneficiaries.
FAQs
How much does family life insurance cost?
Family income benefit is often perceived as the most cost-effective life insurance option. The insurer is less likely to pay out a substantial sum in one go, contributing to its affordability. However, the actual cost varies based on factors such as health, lifestyle, age, and the desired payout.
How long does family income benefit pay out for?
The payout duration is determined by you when setting the policy term. If you pass away within that term, the family income policy disburses payments from the time of your death until the term concludes.
Is family income benefit cheaper than level term?
Yes, family income life insurance is generally more affordable than level term life insurance. It operates as decreasing term insurance, with lower total payouts if you die later in the term.
Is family income benefit taxable?
No, family income benefit is not subject to taxation.
Can family income benefit cover critical illness?
Family income benefit primarily focuses on providing a monthly payout in the event of your death. Critical illness cover can be added separately or included in a life insurance policy.
Family income benefit vs income protection
Family income benefit offers monthly payouts if you pass away, while income protection insurance provides monthly amounts if you are unable to work due to illness.
Who is family life insurance suitable for?
Ideally for those preferring a steady income over a limp sum, especially for managing ongoing expenses, handling new costs and ensuring financial stability until children are financially independent.
Who isn't family life insurance suitable for?
It's not suitable for those aiming to pay off a mortgage in one go. The payout diminishes over time, and if you desire a more substantial payment, a term life insurance or whole-of-life insurance policy may be preferable.
Can I get a joint family income benefit policy?
Yes, family income benefit is available on both an individual and joint basis. Joint policies offer a single set of income payments, typically after the first policyholder's death during the term.
Are my premiums guaranteed on a family life insurance policy?
You can choose between guaranteed and reviewable premiums. Guaranteed premiums remain fixed throughout the policy term, providing certainty. Reviewable premiums may be lower initially but are subject to periodic increases
Are my family income benefit payments index-linked?
You have the option to index-link your family income benefit payments to account for inflation. This ensures that the monthly payout retains its value amid rising living costs, albeit at a potentially higher initial premium.