Author
As a parent, you provide the love and care your child needs and take on all the financial responsibilities. All of this helps your child grow up to be happy and a well-cared-for member of society.
However, what would happen to your children if you were to pass away? Where would they stay, and how will they be cared for? Could the other parent maintain their standard of living?
This is where some form of financial support could be beneficial.
It may not be something you have considered before, and you would not be alone. Research published by Which? has shown that 36% of parents in the UK have no life insurance. This would potentially leave millions of families at risk of being unable to afford their bills and to provide for their children if the worst were to happen.
As the cost of living is rising, now could be the right time to start thinking about a cover that will help your family if the worst happens to you.
Family income benefit (FIB) could be a form of cover that would benefit you. Let’s look at this low-cost way of protecting your family and the pros and cons of FIB.
Family income benefit provides regular financial support to your family
FIB is a type of life insurance policy. You’ll pay a monthly premium for your cover, but unlike other forms of life insurance that pay a lump sum, your family will instead receive monthly income payments if you die.
These payments will run from the day the claim is accepted until the end of the policy term.
With this policy, you can choose how much income you would like your family to receive each month, and your premium would be partly based on this. Many people choose the length of their FIB until their children are old enough to be financially independent.
Family income benefit also has the option of increasing the value of the cover in line with inflation. This is handy as, for example, £2,000 now might not cover the same costs as £2,000 in five- or 10-years’ time. This is beneficial as it helps to keep any FIB received in line with the cost of living.
It is often best suited to those with young children, but any family with dependents can benefit from this protection.
Family income benefit pays an income if you die during the term
Like other forms of “term insurance”, FIB will pay out if you die within a specific term. If you survive past the end of that term, your policy will lapse, and you won’t receive anything back.
For example, you may decide that your family requires a monthly income of £2,000 to maintain their lifestyle if you die, and that the length of that cover should be 20 years.
- If you died 10 years into that policy, your family would receive £2,000 monthly for the next 10 years
- If you died 19 years into the policy, your family would receive £2,000 a month for the last year
- If you survive longer than 20 years, your cover ends and you receive nothing.
Note that this example assumes you aren’t increasing your cover each year in line with inflation (“index-linking”).
Family income benefit is easier to manage
Managing a large lump sum of money can be a real challenge if you have just lost a loved one. It might involve your family budgeting over a lengthy period to ensure all their costs are met and thinking about whether you should invest any of the money. This is difficult at the best of times, never mind while grieving.
Instead, FIB provides you with an easier-to-manage smaller, regular payment. This can make budgeting more manageable and could help you to keep on top of household bills.
A cost-effective way to protect your family
Another benefit of FIB is that it can work out cheaper than similar forms of protection.
However, just like standard life insurance policies, the actual cost will still depend on factors such as your age, health, lifestyle, and the size of income required from your policy.
We can help to find the right protection for you
While receiving a monthly income from FIB can be invaluable, it may not allow you to pay off large debts, such as a mortgage. So, depending on your circumstances, you may still need to consider other types of protection.
FIB can be a lower-cost alternative to taking out a traditional life insurance policy. It will offer your family protection and give you peace of mind. However, it is advisable to get financial advice, so you can get a policy that bests suit your circumstances.
Please get in touch to discuss your protection needs.
Email us at office@verve-financial.com or call 0330 320 5048.
Please note
This blog is for general information only and does not constitute advice. To determine the best course of action for your individual circumstances, please contact us.
Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
