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Family income benefit

Family income benefit (FIB) can be extremely useful in helping support your family long term if you were to pass away.

Unlike a traditional life insurance policy where your family receives one lump sum payout, your family will receive regular tax-free monthly payments. These can be used to replace your regular monthly income to help your loved ones pay household bills, cover mortgages repayments and more.

If you have a family or mortgage to protect, it is definitely worth putting life cover in place. This policy can be a cost-effective way to ensure your loved ones will receive much needed financial support for years after you are gone.

Family income benefit is an insurance policy that will provide your family or other beneficiaries with monthly payments if you were to pass away.

This differs from a traditional term or whole life insurance policy, where they would receive one overall lump sum. It is also important to note that whole of life cover isn’t available for family income benefit, with this being a term life insurance product.

The life insurance policy type that will be the most appropriate choice for you can depend on several factors.

When thinking about which is the right type of cover it is worth considering:

  • The amount of cover you need (£s)
  • How long you want the cover for (term vs whole of life)
  • Do you want level term or decreasing term cover?
  • Do you have dependants? How old are they?
  • Do you have a mortgage, debts or other bills to cover?

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How does family income benefit work?

Family income benefit covers you for a set number of years, as it is a type of term life insurance policy. The length of term available can vary depending on the exact policy and provider you choose. It could be 15 years, 20 years or even 30 years.

You will pay a monthly premium as with traditional life cover, but you will usually find the price of these policies to be far lower.

With this type of policy, your loved ones will receive payments every month rather than one overall lump sum payment. These payments will continue until the end of your set policy term.

Can I get family income benefit life insurance?

YES – Family income benefit is available through several excellent insurance providers. Some providers may even offer additional perks (e.g. terminal illness benefit or accidental death cover) with your policy, so it is worth comparing all the available policies before making a decision.

With family income benefit in place, you can have peace of mind knowing that your loved ones will be in receipt of steady and consistent additional financial support for years to come.

If you have children, you can set up your policy so that the income payments will continue until they are an age where they are financially independent and ready to leave home.

As with any type of life cover, the cost of your policy can vary depending on factors such as your age, height and weight, and general health and lifestyle.

This type of insurance policy is generally lower priced though than standard life insurance, meaning this can be a great option if you are on a tighter budget.

Income protection vs family income benefit

Income protection insurance and family income benefit work similarly, in that both policies will pay out a cash lump sum on a monthly basis.

Income protection is designed to support you if you cannot work for an extended period, and payments will end once you have resumed working as normal. Family income benefit instead replaces your income after you have passed away, to help provide financial security for your family.

There are pros and cons to each type of cover and ultimately which seems most appropriate will come down to personal circumstances and preference.

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Benefits of family income benefit UK

There are many reasons why family income benefit could be the right choice to protect your family. Some advantages of this cover include:

  • Lower cost than traditional life cover
  • Provides ongoing payments over the course of many years
  • The payments received are classed as tax-free income
  • Replaces your regular income to cover household bills, mortgage payments etc.
  • No need for your loved ones to manage or invest a large sum
  • You will often have guaranteed premiums rather than reviewable premiums (meaning no chance of increasing costs)
  • can be index linked, meaning the amount of cover can increase in line with inflation

As with many life insurance policies, you may have the option to add on additional protection alongside your family income benefit.

The most commonly available of these policies is critical illness cover. Critical illness cover will pay out a tax-free lump sum if you were to be diagnosed with a serious illness. This can be especially useful if this illness leaves needing to cover medical expenses or being unable to work, leading to lost income.

These funds can be a much-needed lifeline, providing vital extra financial support at a difficult time. There are many reasons you could claim on critical illness insurance, with some of the most common reasons for claims being:

It is possible to take out a joint policy with a spouse or partner, as with traditional life insurance. It is important to remember though that this policy will only pay out once, even though the payments from this claim will be ongoing.

This means that when the first policyholder has died and a claim has been accepted, the cover will stop for the remaining partner. They will then need to replace this policy with a new one, so they are still covered in the event they also passed away.

Should family income benefit be written in trust?

A trust can be great way to ensure the pay out from your life cover goes to exactly who you decide e.g. a spouse or child(ren).

You can avoid things such as probate and inheritance taxes (IHT) by putting a policy into trust, making it quicker and easier for your loved ones to access these funds.

Family income benefit can be written into trust in the same way as any other life insurance policy.

Compare family income benefit quotes

The best way to get the right life cover in place at a price to suit your budget is to compare all the policies and providers available. Comparison can be key to finding the terms and level of cover you need at a lower cost.

Family income benefit is already a cost-effective alternative to traditional life cover, but that doesn’t mean you can’t still save further with the help of an expert advisor.

We can offer you FREE, FRIENDLY advice on the best way to protect your home and family, so you can rest easily knowing they have a financial safety net in place.

Useful resources

Gov.uk – Benefits and financial support when someone dies

Gov.uk – Bereavement Support Payment

Citizen’s Advice – How to claim bereavement benefits

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