What is family income benefit and how does it work?
Family income benefit is a specific type of life insurance that is aimed at parents and families. The main difference between family income benefit and term life insurance is that your loved ones will not receive a lump sum of money, instead they’ll get monthly payments instead just as if you were still providing them a salary-hence it is called an income.
If you die and your loved ones go on to claim against the policy, it then pays out a regular, tax-free income up until a specified date which replaces your lost income. Having a regular income instead of a large sum of money makes budgeting a lot more straight forward, replacing the income of the lost relative.
If you were to take out a policy over a 20-year term and then claimed after 10 years, the policy would continue to pay out for a further 10 years. If however, the claim was made after 15 years, the payouts would only continue for the remaining five years.
You specify how much of your income you’d like to be covered or how much your family would then receive each month, but one thing to keep in mind is that the larger the monthly payout, the higher your premiums will be.
It’s aimed at families with young children as it provides a regular income. This income would typically cover the cost-of-living expenses, and it can potentially come with cheaper premiums when compared to other life insurance policies too, as the provider pays in instalments instead of the lump sum.
It is often taken out in conjunction with a term life policy: for example – your mortgage might be covered by your lump sum/decreasing term life policy and having a family income benefit would then replace the lost regular income, guaranteeing your family would have a fixed payment each month to continue to live off.
If you are considering putting in place some protection and would like advice on the most appropriate type of policy to suit your unique circumstances, we can tell you about the ‘totally protected mortgage’ and ensure you are covered. Contact Aspire Financial Services now and book your free 30-minute consultation.