Family Income Benefit Insurance is a lesser-known type of family life insurance cover which pays, not a lump sum, but an annual income to your family for some years after your death.
A family income benefit policy can typically cost 35% less than normal life cover, and provides your loved ones with a tax-free income every year until the life policy ends.
One benefit of family income benefit insurance is the gradual or staged nature of the payout, which ensures that there is no lump sum that can be ‘blown’ in one go, and makes the cover perfect for providing an investment for children in situations where a tragedy might deprive them of a parent.
“Family Income Benefit can be linked to school fees or the cost of home help for the surviving partner, if they have children that need to be cared for. The money continues to pay out until the end of the policy, which is until the children reach adulthood,” said Matt Morris, senior policy adviser at LifeSearch.
For an £8 per month premium for a family income benefit policy from LV=, a male aged 30 can currently obtain family income benefit insurance providing an annual income of £13,767 for 20 years, giving a total payout of £275,340, according to LifeSearch. On a traditional ‘lump sum’ life policy, the same premium would provide life insurance cover of £150,000 (from Royal Liver).
A woman of the same age would fare even better, as with family income benefit insurance her £8 premium would provide her family with annual income of £22,032 per year, or £440,640 over 20 years, compared with lump sum cover from Royal Liver of £221,631 at the same price.
Family income benefit insurance also provides the flexibility to commute the life insurance cover to a lump sum at the end, if preferences have changed. In that case, the lump sum payout would reflect the traditional life cover payouts in the examples above.
