Family Income Benefit

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What is Family Income Benefit?

Family Income Benefit is a type of life insurance in which the insurer provides a monthly benefit to those left behind until the policy end date, if the insured person dies. This is in contrast to Level or Decreasing Term Assurance, which would instead provide a one-off lump sum benefit instead. Family Income Benefit is useful as it can be easier working out how much your family and those left behind may financially require on a month to month basis rather than as a one-off lump sum amount.

Receiving a monthly benefit instead of a one-off lump sum can also allow those receiving the benefit to more easily manage their finances allowing them to budget towards things such as mortgage payments, rent, childcare and their everyday expenses. Some insurers will also allow those receiving the benefit to instead switch from a monthly amount to a lump-sum payout instead if they so prefer.

Do I need Family Income Benefit?

Family Income Benefit is often overlooked when discussing life insurance, however depending on you and your families circumstances is a type of insurance that can make a lot of sense.

It can be ideal to have a one-off lump sum benefit for example with a level or decreasing term assurance plan, which may allow those left behind to pay off a mortgage for example. However, if you also consider the longer term effect of your death, here are some examples as to why having a family income benefit can be useful to those left behind:

Allowing your spouse or partner to use the benefit towards additional childcare costs if for example you were the main childcare provider
Assisting those left behind with any ongoing expenses (mortgage payments if one still exists, bills, living costs)
Potentially enabling those left behind to start/continue saving regularly (e.g. to save for children’s university fees, save for a deposit on a house)

How does Family Income Benefit work?

Family Income Benefit is designed to pay a regular monthly benefit to those entitled to it until the end of the policy term, if the person(s) insured were to die, or be diagnosed with a terminal illness (i.e. they have been medically diagnosed as having less than 12 months to live)

After an approved claim, the insurer would pay out the monthly benefit directly to the legal owner of the policy. Assuming the legal owner of the policy was also the insured person and they have died, the insurer would pay the benefit to that persons personal representative, usually the executor named in their Will. Alternatively, if the policy has been placed in a trust, the insurer will make payment to the trustees whose responsibility is to distribute the benefit to the beneficiary of which there may be more than one e.g. deceased persons spouse and/or children.

How much does Family Income Benefit cost?

In general, the following factors are taken into account by insurers when establishing the cost of cover:

The amount and term of cover required.
The insured person(s) age.
The applicant’s hobbies and pursuits – if an applicant engages in dangerous activities, the insurer may require a higher premium or exclude claims made as a result of that activity.
The applicant’s lifestyle – smokers generally pay higher premiums than non‑smokers. Those who drink heavily may also be required to pay higher premiums.
The applicant’s health – if the applicant has a medical condition that could potentially shorten their life, the insurer is likely to require a higher premium or even decline the application. Insurers will be concerned about obesity and high blood pressure, in addition to existing or past illnesses or medical conditions.

Please contact us or request a call back to discuss and receive a quote and advice on your family income benefit insurance needs.