Family Income Benefit Insurance
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Family Income Benefit Insurance - What is it all about ?
A Family Income Benefit policy is designed to pay out a regular monthly income to your family on your death during the term of the plan. This income continues for the remaining term of the policy. Income can be payable monthly, quarterly or annually or sometimes commuted to a lump sum if required.
In essence a Family Income Benefit is therefore a form of decreasing term assurance in that you select the date when benefits are to cease eg. when children are no longer dependant or go to University, and you select the amount of tax free cash you would like your dependents to receive.
Family Income Benefit - Summary
- A cost effective type of term assurance in relation to the cover required (sum assured)
- The Family Income benefit can be linked to inflation
- On death, benefits are payable by instalments until the ceasing date.
- Regular payments are currently paid out tax free on death
- Family Income Benefit term plans usually has no surrender cash in value at any time.
- Medical evidence may be required and a medical examination for those with health issues
- Unlike Lump sum Term Insurance, it is easier to work out cover required in relation salary
- Can be set up on sole or joint life basis
- Waiver of premium benefit to protect the premiums due to sickness or accident
- Can also include Critical illness benefit cover eg; cancer, heart attack, stroke, diabetes
So to make sure you buy the right amount of Family Income Benefit cover, with the right terms and conditions, you should consider getting some life assurance advice not just getting the cheapest quote for a random amount. The correct Family Income Benefit Advice means the adviser assesses what your family would need, and compares Life Insurance Providers for the Family Income Benefit cover that suits you best.
Always answer questions as best you can and disclose any existing medical conditions when asked. If you don't give the full facts, you could invalidate your Family Income Benefit Insurance Policy and the insurance company won't pay out.
Family Income Benefit Insurance Policy - Check the Small Print
When looking for Income Life Insurance Policy, check for any exclusions - in other words, when the policy won't pay out. For example, many Family Income Benefit plans do not cover death due to alcohol or drug abuse. You might not be covered if you take part in risky sports eg;Rock Climbing. If your health is poor when the policy starts, some causes of death might be excluded or you might be refused cover altogether.
Premiums shown are usually fixed for the whole term of the Family Income Benefit Insurance Policy. There are also contracts where premiums are reviewable, after a certain period, usually 5 years.
How flexible is the contract? Can you reduce or increase cover easily as your circumstances change? Are there extra charges for doing this? Does cover stop immediately if you miss a payment or is there a period of grace?
By paying extra, you can usually include a waiver of premium. It pays the premiums if you can't work because of a long-term illness so that your cover is not interrupted.
If you want to change life cover provider, check the level of premiums for the new contract before switching (premiums may have gone up because of older age or because you have developed medical conditions). Also check the new level of cover compared to the previous one. Different benefits may be available, and different exclusions may be applied - for example you may not be covered for medical conditions that have developed before the switch even if these were covered under the previous contract. If you do decide to change, make sure you do not cancel your original cover until you are fully covered by the new contract.
The Family Income Benefit policy can be set up under trust. This means that in the event of death, proceeds of the policy are paid directly to dependants of your choice. Provided a trust is set up properly, there may be benefits to doing this. Most Insurers proivde standard trust forms. However, using a trust may not be suitable for everyone and because of the complexities we recommend you may wish to seek legal life assurance advice.
What does my Family Income Benefit Insurance Policy Cost ?
This depends on several factors, such as the amount of cover you want and the length of the term. Naturally, it's also based on the likelihood of your insurer having to pay out: if you're a smoker and do a dangerous job, you'll pay more than a non-smoking office worker.
Family Income Benefit Insurance Plan also costs more for men because, on average, they don't live as long. Always compare what's covered by a policy, not just the price. Some might be cheaper than others, but they may not offer the same level of protection.
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