A Family Income Benefit is a type of life insurance which will run for a set period of time known as a term. If you die within this period, the policy will pay out a regular tax-free income until the end of this term as opposed to traditional life insurance where a lump sum is paid out upon death.
It is worth bearing in mind that cover is only for as long as the policy runs. Once the agreed term ends, the cover and any income payments will end with that. So let’s say that you have a 20 year policy and die 10 years into this, then the policy will pay out a regular income for the remaining 10 years. If you die 15 years into the policy, it will pay out for the remaining 5 years.
Family income benefit is a cost effective and simple way to provide your family with a steady income rather than a lump sum if you die. If you have a young family, you might want cover to consider running the policy until your children are grown up, reach 18 or perhaps 21 to get them the best start in life. This income could be used to meet everyday expenses or to pay for specific on-going expenses such as school or university fees.
This type of policy shouldn’t be taken to cover your mortgage or other debts. You’ll need term life insurance that pays out a lump sum for that. However, family income benefit is definitely worth considering if you want to make sure your family receives an income for a given time should you or your partner die. It’s easy to decide how much cover you might need and for how long and due to this, it is usually quite inexpensive, especially if you take it out while you are still relatively young.