Family Income Benefit Insurance
Understanding Family Income Benefit Insurance
A type of term assurance in which, following the death of the life assured, instalments, rather than a lump sum, are paid to the beneficiary for the remainder of the policy term. If the life assured lives to the end of the term, no benefit is payable.
You probably bought cover to protect your house – how about everything that makes it a home?
Most people buy mortgage protection – it’s a type of cover that guarantees repayments on your house, but it won’t go further to help those who live there.
Life needs living and bills need paying. Family Income Benefit picks up those costs if you’re not there to cover them.
Family Income Benefit can replace your pay if you die with a monthly income for the family.
Say you take home £2,000 a month, and want that income secured for 20 years. Die two years into the policy and your family would get £2,000 a month for the remaining 18 years covered.
All policies can be indexed, level or decreasing.
The term is usually selected to align with the associated debt.
Clearing the mortgage after death is a priority, of course. Indeed, many mortgage lenders will insist life insurance is in place.
The pay-out will mean the family can remain in the property, and the burden of meeting the monthly mortgage repayments will be removed (note that decreasing term insurance is not appropriate for someone with an interest-only mortgage, where the capital debt is only repayed at the end of the mortgage term).
Not all decreasing term insurance is taken out to cover mortgages, though.
Some people also choose this type of life cover because they do not feel such a big payout will be necessary if they die in, say, 20 years rather than within the next 10.
As its name suggests, the amount of cover provided by this kind of policy does not change over time. This means that it won’t increase in line with inflation, or any other measure. PREMIUMS WON’T CHANGE.