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There are various types of life insurance that you can choose from when you take out a new policy. This, of course, depends on whether they’re offered by the insurance company you’re interested in. One of the little known types of life insurance policy is family income benefit, which can help your family better manage the payout of your life insurance policy should you pass away.
Most life insurance policies will pay your family and loved ones a single lump sum of money if you pass away. However, if you opt for a family income benefit policy, the payout is spread out over a predetermined period. This will ensure that your beneficiaries can better manage finances instead of receiving one large chunk.
This is especially useful if you want your life insurance to cover your family’s living costs since it’s easier to budget when you receive a consistent amount of money each month.
Note that family income benefit is a term life policy, therefore, it will only payout if you pass away in the predetermined period agreed on between you and the insurance company.
As previously mentioned, family income benefit is suitable for covering living costs. If your loved ones receive a large lump sum, they could potentially lose it or spend it on a bad investment. With family income benefit, you can rest assured that your family is financially protected but not overwhelmed by the amount of money they receive.
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You shouldn’t confuse family income benefit with income protection since they have two very different functions. As mentioned before, family income benefit will see your life insurance claim paid out in instalments, whilst income protection only covers your salary when you are unable to work due to injury or illness.
The cost of family income benefit will depend on your specific requirements. The insurance company will take into account your age, occupation, medical history, health, and lifestyle. In addition to this, the total cost is influenced by the coverage amount. If you’re unsure of how much coverage you need, you can use our helpful life insurance calculator to get an estimate.
You should take into account how much it would cost your family to cover expenses, such as mortgage payments, and the living costs of your children until they are likely to be financially independent.
When you’re ready to take out a family income benefit policy, you should have a good idea of how much coverage you need. You should also know how long you need the coverage to last. Most people set this to the number of years left on their mortgage payments or until their children are financially dependable.
If you pass away during the term of your policy, your family will receive monthly tax-free income payments from your policy.
There’s a range of add-ons and benefits that come with a family income benefit policy that you should know about.
Like a standard term life policy, family income benefit also comes with terminal illness cover. This policy ensures that you’re able to make a claim if you are diagnosed with a terminal illness and are given less than 12 months to live.
Unlike terminal illness cover, which is offered with most policies, you’ll need to ask for critical illness cover to be added for an extra monthly premium. This type of policy protects you and your family if you fall critically ill and you can’t work.
Yes. You can write your family income benefit policy in trust. Many insurance providers even offer this service, so look around for the right provider. Writing your policy in trust will ensure that a trustee chosen by you will allocate your life insurance payout exactly how you want it.
A joint-life policy is one that covers both you and a partner. Typically, couples will opt for a joint policy to avoid paying more for two separate policies. If you are the sole or primary income earner in your family, you should definitely consider getting a joint policy.
Taking out a joint policy would ensure that your family can continue living in the same home and with the same living standards as before.
As evidenced by this article, a family income benefit policy is a fantastic way to protect your family if you pass away early. Here are the key points that showcase the benefits of family income benefit:
If you find that your family income benefit premium is high, you can follow some steps to try and find a better deal. Firstly, you should shop around and get multiple quotes from various companies. The first quote you receive is rarely the best one, so compare companies to find a good deal.
It would help if you also tried to go through a specialist company with a history of offering family income benefit. You should also make sure to use a good life insurance calculator to calculate exactly how much coverage you need. If you don’t, you could end up paying for more than you need.
Finally, you should work on the variables that are under your control. Insurance companies will ask for various details about you, such as age and medical history. If you can quit smoking, lose weight, and start living a healthier lifestyle, your insurance premium should drop dramatically.