Family Income Benefit

What is it?

Family Income Benefit pays a regular monthly tax-free income if you die. Normal life insurance will pay out a lump sum to your estate or Trustees if you were to die during the policy term. Family Income Benefit will pay out a regular monthly sum of money for a set period of time. As this is a different way to pay out, Family Income Benefit can often work out as a cheaper option to usual Life Insurance which you often take out to cover the amount owing on your mortgage.

Why would I need Family Income Benefit?

Most people who require and see the benefit of this type of insurance are those with children. If a parent were to die this can cause potential hardship to a family, especially if it is the main wage earner who has passed away. Even if the deceased were the homemaker, there is a potential that childcare is going to be required while the other parent goes to work. Your children may have hobbies and clubs that they attend. If the household income has reduced due to a death, then these activities may have to stop as they are now not affordable.

By having a Family Income Benefit policy, a monthly sum would be payable to assist with the household budget and maintain the children’s lifestyle as much as possible.

Another reason why someone may want to take out this type of cover is if they have appointed Guardians for their children. Leaving someone the job of raising and caring for your children is a massive responsibility and will come at a price. Often a Family Income Benefit policy can be set up in Trust for the benefit of the children to help their new family to look after them at what will be an already distressing time.

How does it work?

You would need to decide on how long you would want your Family Income Benefit policy to last. Most people who have this type of cover will have the policy last until the expected age that their youngest child is financially independent or until their mortgage is paid off. Things to consider when working out how much benefit is going to be needed are, what are the usual monthly costs of the children, are there possible school fees to pay now or in the future, fees for clubs and hobbies etc. All of these things mount up, so it is useful to sit down and go through your budget to come up with a realistic figure.

Of course, the figure that you come up with may be correct at today’s prices but what about rising costs? The good news is that it is possible to index link the benefit to the Retail Price Index so that the benefit payable will be in line with inflation.

Family Income Benefit is a relatively inexpensive alternative to normal life cover and is only available through a protection specialist such as Southern Mortgages. If you would like to know more or get a quote, then please call our office on 01702 746811 or book an appointment.

https://calendly.com/sue-mortgage/one-to-one

Photocredit: Canva February 2022