When reviewing your life cover options, Family Income Benefit could also be a part of the review.
Family Income Benefit (FIB) guarantees your loved ones a regular monthly income, should you die within the term of the policy.
The policy ensures dependents can afford mortgage payments, household bills, and other finances, due to the benefit pay out comes as regular income payments. This often makes things easier for the surviving partner to plan ahead, knowing they have a guaranteed regular monthly income.
When calculating the amount of cover required, factors such as the additional child care costs for what is now a single parent family are considered. In these circumstances, a family income benefit life insurance policy can help with budgeting.
FIB can also be a useful policy for those employees that have a company death-in-service, or company group life policy.
The death-in-service policy will pay out on death, although these are usually a multiple of salary, and the total may not be sufficient to cover the outstanding mortgage, and is unlikely to provide enough of a cash lump sum to allow the partner to plan for the future.
Many opt for a FIB and a lump sum life insurance term policy. In this way they have the best of both worlds, a lump sum on death, combined with a regular monthly income.
Many partners prefer this approach, as it removes the stress of managing a lump sum over time, and the surety of a monthly benefit, making budgeting and future planning simpler.
Another option is to have a FIB alongside a mortgage life cover policy. In this way the outstanding mortgage is paid off, and the family will receive the monthly benefit from the FIB. This option often ensures the surviving partner does not need to relocate (down size) or re-mortgage, borrow and incur more debt.
Due to FIB policies paying out a regular monthly benefit, the commitment from the insurer decreases with every month the policy is in force without a claim. This means FIB policies are usually a lower cost option for life cover. They can be written for a single person or in joint life, whereby if either partner dies the policy will pay out. The policy can be taken out with the benefit linked to RPI, to ensure the benefit will increase in line with inflation. Most FIB policies have terminal illness included, allowing the benefit to be paid whilst the policy holder is still alive, which can help with care fees etc.
A FIB policy could be particularly important to a family with young children.
If one of the parents is diagnosed with a terminal illness or dies, a FIB policy may help to protect and maintain the family’s lifestyle by paying for things such as childcare and utility bills.
If a single parent were to die or be diagnosed with a terminal illness, FIB can help secure the child’s or children’s financial future by providing their new guardian with a regular monthly income. This may help cover their day-to-day expenses such as food, clothes and school supplies.
FIB may also suit someone who has become their loved one’s full time carer. Having this in place means that if the carer dies, there is a monthly income available to pay for things such as private home care, care visits.
As with all insurances, it is prudent to get some independent advice from a life insurance specialist. They can help review the options available, and recommend a cover plan to suit your needs. Our independent advisers at Temple Wealth would be happy to help and discuss your needs. You can send a message to our Contact Us or Facebook page, or contact the office on 01329 282882.
Life Assurance plans typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse.