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Family income benefit, often referred to as family income protection, is a type of life insurance.
A monthly premium is paid and cover remains in place for a specified length of time.
However, unlike traditional policies that pay out a lump sum, family income benefit provides beneficiaries with a regular, fixed, tax-free income.
Regular income payments run from the date of death, until the end of the policy term, as chosen at the outset by the policyholder.
Monthly income payments can replace a lost income and help long-term family budgeting.
Family income benefit, or FIB, is well suited to new parents, wanting an affordable way to ensure dependants are adequately provisioned for.
Watch our family income benefit video.
As with life insurance, family income benefit can be very cost-effective, but the cost of premiums can vary between insurers.
Therefore, to ensure you receive the best possible solution for your needs it is important to compare quotes.
At Reassured, our award-winning FCA regulated team can compare family income benefit with life insurance to provide you with all the information you need to make an informed decision.
As with life insurance, the cost of family income benefit will be based on your personal information, including age, smoking status and medical history.
Therefore, without collecting this information, it is impossible to determine how much you will pay each month.
However, it is possible to determine the amount of cover you require.
As discussed, family income benefit is ideal for replacing lost income and covering day-to-day living costs, whilst life insurance is better suited to protecting the long-term future financial stability of your loved ones.
Therefore, when determining the amount of cover you require, you should calculate how much your family would require each month.
This should include expenses such as rental payments, utility bills, household running costs, education fees and food.
The sum of all these elements will then help determine how much cover you need.
MoneyAdviceService, set up by government, provides free and impartial advice.
Before purchasing family income benefit, you need to establish how much income your dependants require each year.
Ideally, this would cover all family living costs, not just now but also in the future.
Then you need to decide how long you require the cover to last, (known as the ‘term‘).
Often policyholders ensure the term runs until their children are financially independent.
Normally this tax-free income is paid monthly, although it can be paid quarterly.
These payments can help with the long-term budgeting of day-to-day living expenses.
An advantage of family income benefit is it does not require beneficiaries to budget, manage or invest a large lump sum.
This can involve making complicated investment decisions, that incur fees/taxes, at a time when you are grieving.
To ensure your family income benefit payments meet your dependant’s needs, both now and in the future, it may be a good idea to link it to indexation.
Unlike other forms of life insurance, proceeds from family income benefit are not subject to tax.
Payments are usually made on a monthly basis, as opposed to being consolidated within the deceased’s estate, meaning they are not affected by inheritance tax.
It is also possible to bypass inheritance tax on pay outs from other types of life insurance if you write your policy in trust.
At Reassured we are able to offer a free trust service on the majority of the policies we arrange.
Family income benefit is very cost-effective as the risk to the insurer reduces each year and they are not guaranteed to pay out.
As with all life insurance, the cost of FIB premiums largely depends on certain key factors:
Term life insurance pays out a lump sum if the policyholder dies, whereas family income benefit provides a regular tax-free income.
As with decreasing term life insurance, the risk to the insurer reduces each year resulting in the cost of family income benefit premiums being low in comparison with other policies
Both policy options are term-based, therefore if you outlive your policy no pay out is issued.
However, it does not have to be a case of one, or the other - unlike other types of insurance, you can secure more than one life insurance policy.
Subject to budget, you may decide to take out term life insurance, that pays a lump sum for larger one-off costs, (like paying off the mortgage), alongside family income benefit, which provides your dependants with a steady income for family living costs.
Both options provide protection and security for your loved ones and it is a case of weighing up the type of cover you need and what you can afford.
Although income protection and family income benefit sound similar, they are two very different policies.
A family income benefit policy only pays out if you pass away during the policy term.
Whereas income protection protects your income whilst you are alive, but unable to work due to an illness or accident.
Please note, we do not currently sell income protection at Reassured, although we do sell family income benefit as well as other life insurance policies.
Most family income benefit policies can be extended to include critical illness cover.
This means your family could start benefiting from the cover, in the event you were no longer able to work because of falling critically ill.
However, adding a critical illness element to your policy is likely to result in paying higher monthly premiums.
At Reassured, we are able to add critical illness cover to all of our term life insurance policies.
As with most forms of life insurance, family income benefit includes terminal illness cover as standard.
This means that you can make an early claim if you are diagnosed with a terminal illness and predicted to pass away within 12 months.
Your family will begin receiving monthly tax-free payments from point of claim until the expiration of your policy.
These payments could prove invaluable in helping with the burden of living costs during a very difficult time.
Terminal illness cover comes with all life insurance policies arranged through Reassured.
At Reassured family income benefit policies can also be purchased on a joint basis.
Income payments start from the passing of one (not both) of the policyholders, usually the first.
However, it may only be slightly more expensive to take out two single policies.
For joint life insurance quotes, simply contact Reassured today.
When you take out family income benefit, you have a choice of guaranteed or reviewable premiums.
If you choose a guaranteed premium, your insurer will never increase the monthly cost.
Whereas reviewable premiums normally cost less initially, but your insurer has the power to increase the cost during the term.
At Reassured all life insurance policies come with guaranteed premiums, ensuring you know exactly what you have to pay each month.
The cost of your premiums is calculated in the same manner as other forms of life insurance; based on the likelihood of a claim.
Factors such as your age, health and lifestyle will be taken into account and the cost of your premium reflects the level of risk you pose.
As with other forms of life insurance, family income benefit can be written in trust and most providers offer trust forms free of charge.
At Reassured we can provide customers with a free trust service to help with the application process if offered and required.
Writing your policy in trust means that the proceeds fall outside your estate, therefore avoiding probate (for a faster pay out).
Trusts can also help you reduce the likelihood of having to pay 40% inheritance tax.
Advantages of family income benefit
Disadvantages of family income benefit
As with all forms of life insurance, cost can differ significantly between insurers.
As a result, it is essential to compare multiple quotes to ensure you receive the most cost-effective cover.
At Reassured we do all of the hard work for you, comparing quotes from the top insurers to secure the right cover, at the best price.
We can also unpick any jargon you do not understand, as well as compare the cost of different policy types.
And our award-winning FCA registered life insurance broker service can provide you with a quote completely free.
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