A Family Income Benefit policy can be a great choice for people who want the financial security that life insurance gives but can't afford the cost.
This less common type of financial protection plan is usually less expensive than a typical life insurance policy, and it can be a great way to take care of your family if you die.
How do you get the Family Income Benefit?
Family income benefit gives money to your family, just like a traditional life insurance policy does. However, these two types of financial protection are very different. When a claim is made on a life insurance policy, a lump sum is paid out. The value of the lump sum is the same whether the claim is made two years into the policy or one year before the policy ends (assuming it is level cover).
With a family income benefit, however, it's the other way around. A family income benefit plan is only good for a certain amount of time, but if you die during that time, your family will get monthly payments until the policy ends. For example, if your plan is for twenty years and you die after ten, your family will get a payment every month for the next ten years. If you die after 18 years, they get the same payment for the last two years. If you are still alive when the policy ends, you will not get any payments. Family income benefit is less expensive than regular life insurance because of how the benefits are paid out.
Who does it help?
This kind of income life insurance plan is great for young families, and it was actually made with them in mind. Conventional life insurance isn't always affordable for young families, but a family income benefit is much cheaper. Choosing a family income benefit can cut your monthly premium payments in half compared to a traditional life insurance policy, so you can protect your family's financial security without sacrificing your own.
Easy to change and no taxes
A plan for family income benefits is very flexible. You can choose when your policy ends, and you can decide how much money your family will get each month. For example, you can choose to keep your policy in effect until your youngest child finishes school or college, or until they are old enough to be financially independent.
Like regular insurance policies, family income benefit gives payments that are not taxed. The policy, on the other hand, does not have a cash-in value because there is no investment part to it. Many companies that offer a family income benefit plan also have a cash option, so that if a claim is made, the beneficiary can choose to get a lump sum of cash instead of a series of monthly payments.
You could also make your policy depend on the Retail Prices Index. This means that the amount of money your family gets each month is based on how much it costs to live. If you buy a policy this year and your family makes a claim in twelve years, the payments they get will go up to keep up with the rising cost of living. This makes sure that your policy keeps its value and can still meet your family's financial needs, no matter when the claim is made.
It's important to make sure your family has enough money for the future, so it's important to know what you need and get it right. If you're not sure, it's best to talk to a licenced financial adviser who can help you find the best policy for your needs and budget.
