What is Family Income Benefit Life Insurance?

Article by UK Insurance Index
Article added: 29/6/2005 - Last updated: -
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Family Income Benefit is one of the least expensive forms of Life Insurance and differs from most other types in that it is designed to pay the benefit as an income rather than a lump sum.

Low Cost Family Protection
The fact that the amount of cover (sum assured) is paid in regular instalments means that the risk to the Insurer is decreasing over the term chosen which makes Family Income Benefit cheaper than Level Term Life Insurance where the risk to the Insurer is the same throughout the term of the plan.

Regular Tax Free Income Payments
In the event of a claim, income can be paid monthly, quarterly or annually and under current rules the income is tax-free. This makes it ideal for Family Protection where a family are looking to insure the main bread winner over a specific term, for example to his or her retirement age.

Extra Cover Options
Family Income Benefit can also include Critical Illness Insurance which is designed to pay the selected income if the policyholder is diagnosed with a Critical Illness within the chosen term. Critical Illness conditions vary from insurer to insurer but in general include such conditions as Cancer, Heart Attack, and Stroke etc. In addition to these “Core Conditions” applicants can also select comprehensive cover which usually includes 25 to 30 additional conditions.

Although Level Term Life Insurance is perhaps the most popular choice for Family Protection, the difficulty for most successful claimants is how to generate an income from the cash lump sum. For simplicity most people tend to place the proceeds of the policy in a Bank or Building Society deposit from which they take a regular amount of interest as income. The problem with this is that the interest generated may be subject to tax and will have to be declared via Self Assessment.

Family Income Benefit therefore should be considered when looking to effect insurance for Family Protection. Family Income Benefit is a low cost, tax efficient solution to Family Protection.

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PLEASE NOTE: The guidance published in this article is for information only and does not constitute financial advice or a recommendation of any particular product or company. If you are in any doubt please consult an independent insurance adviser. A database of advisers in your area is available at www.unbiased.co.uk.

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