What is family income benefit insurance?

What is family income benefit insurance?

Family income benefit is a type of life insurance. It pays out a tax-free, regular income for a set period if you pass away during the policy term.

How does family income benefit work?

When you buy a family income benefit policy, you choose how long you want the cover to last. Many people choose a term that lines up with their children’s or dependants’ ages, so the cover lasts until the youngest child turns 18 or 21.

If you die during the policy term, your family will receive a regular income for the rest of that time. For example, if you take out a 20-year policy and die after 8 years, the policy will pay your family an income for the remaining 12 years.

This type of insurance can provide peace of mind, knowing your loved ones will still be able to cover monthly expenses if you're no longer around.

Can I protect against rising living costs?

If you’re worried about rising living costs reducing the value of the payout, you can choose to ‘index link’ the cover. This means the benefit will increase in line with inflation, keeping its value over time.

What other types of cover are available?

Other types of life insurance, like policies that pay a lump sum on death, are available. Some people choose to have both a lump sum policy and a family income benefit policy. The lump sum can be used to pay off large debts like a mortgage, while the family income benefit covers monthly bills.

Is family income benefit the same as income protection?

No. Family income benefit shouldn’t be confused with income protection cover, which pays you a monthly income if you're unable to work due to illness or injury.

How much does family income benefit insurance cost?

The cost of premiums depends on several factors, such as your age, health, and how much cover you need. It also depends on how long you want the policy to last and which provider you choose. For example, younger, non-smokers generally pay lower premiums. Older people and smokers often pay more as there’s a higher chance of a claim.

How can I figure out how much cover I need?

Think about any other benefits your family might receive if you die. For instance, some employers offer a ‘death-in-service’ benefit, which pays a multiple of your salary. But this might not be enough to cover all of your family’s expenses, so it’s important to work out how much extra monthly income they’d need.

Can I add critical illness cover?

Many family income benefit plans allow you to add critical illness cover. This means the policy will pay out if you're diagnosed with a serious illness, not just if you die. However, premiums will be higher if you choose this option.

Am I eligible for family life insurance?

Different family income benefit policies may have slightly different eligibility criteria, but, as a general rule, as long as you’re a UK resident aged between 18 and 64, you should be able to apply for family income benefit insurance. You don’t need to have a medical to qualify for family life insurance, but you will need to answer questions about your health and lifestyle. As policies vary, it’s worth seeking expert help from one of our protection specialists at L&C. They can talk you through all the available options and help you find the best cover to suit your needs.