08 August 2019

How family income benefit can help your family

5 min read

 

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Family income benefit is a type of life insurance that provides a regular income for your loved ones if you die during the term of the plan. There is no cash in value, so if you stop making payments your cover will end.

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Most families rely on at least one regular monthly salary to cover their household spending. How would your household cope financially if you lost a source of income?

For peace of mind, many people choose a type of life insurance called family income benefit.

What is family income benefit?

Family income benefit is a type of life insurance known as term insurance, which lasts for a set time known as the term. A family income benefit policy will pay out a monthly tax-free income if you die during the term, until the policy ends.  

How does family income benefit work?

The monthly payout from a family income benefit policy is paid from when you die until the end of the term. Once the term ends, cover and any payments stop. So if you take out a 20-year policy and die five years into it, your family will receive a regular monthly income for the remaining 15 years. If you were to die 16 years into the policy, it will pay out for the remaining four years.

 

Padlock and key - understanding family income benefit

Why you might want it


Household bills and other financial commitments need to be met and a loss of income could mean financial hardship - this is where family income benefit life insurance can help in terms of providing financial support.

How much cover should I get and for how long?


This will depend on your own circumstances. For example, if you have a young family, you might want cover to run until your children are grown up, using the income for everyday expenses or specific items such as school or university fees.

To decide how much cover you want, work out how much your family is likely to need every month. It’s a good idea to factor in inflation (the rise in the cost of living) when doing your calculations as this can impact the amount you’ll need in the future.

How much does family income benefit cost?

Monthly premiums are based on the amount of income you choose, how long you want it for, your age, health and lifestyle. You can typically choose a level income (where the monthly income payment remains the same), or pay more for it to rise by a set amount each year. But for this you usually need to seek professional financial advice.

Looking for more information on family income benefit life insurance?