If you're the main earner in your household, then losing your income could have a big impact on your family's ability to maintain their lifestyle. From mortgage or rental payments to school fees and loans, the sudden loss of an income after a loved one has passed away adds to the stress at a very difficult time.
Family Income Benefit, also known as FIB, is a great way to secure your family's future by providing a monthly cash sum to help them financially.
Let's take a closer look at family income benefit and how this cost-effective life insurance plan can help you to protect your family for the months and years ahead.
How does family income benefit work?
Family Income Benefit is a type of life insurance policy that pays out a regular monthly benefit if the policyholder passes away. It's up to you to decide how much you'd like the policy to pay out each month as well as the length of time that you'd like it to pay out for.
John takes out £1,000 per month of family income benefit over 25 years. If John passes away after five years, the policy will pay out £1,000 per month for the remaining 20 years of the policy.
If John were to pass away after 20 years, the policy would pay out £1,000 per month for the remaining five years.
The longer the policy runs for without a claim being made, the lower the total that will be paid out in the event of a claim. In this sense, it works like a decreasing life insurance policy and is actually much cheaper per month than a level term plan.
Will the cost change as I get older?
The most common form of monthly premiums for contractor family income benefit is guaranteed premiums which remain fixed at the same price for the whole duration of the policy. Since the total amount of cover is technically decreasing over time, the price starts out and remains a lot lower than its level term counterpart.
Alternatively, you may choose to increase the amount of cover in place in line with RPI or a fixed percentage. Your monthly premiums will also increase, however, this will protect against inflation and the devaluation of a potential payout.
How long should I be covered for?
The length of time that you'd like to be covered for by your contractor's family income benefit depends on your own individual circumstances and budget. You may decide to run the cover in line with a commitment to school fees – so perhaps just a few years until your children pass through the school, college, and university.
Alternatively, if you're the main breadwinner it could make more sense to extend your cover through to retirement age, ensuring that your family can continue to pay bills and replace your income in the event of death.
For more information on family income benefit or for a personalised quotation based on your individual circumstances, contact a member of the team today.