Life insurance isn’t the most exciting of topics, and probably something that continuously gets pushed down the to-do list if you’re still to take out any cover – particularly if you’re a busy parent looking after a young family. Truthfully though, as a parent, having some sort of life insurance cover is SO important!
In most households, the bills, mortgage repayments and household spending is reliant on at least one regular salary coming in. It’s not something we want to think about, but what if the worst was to happen and one of the main breadwinners in the household were to pass away or become seriously ill? What would happen to the rest of the family then?
Under the life insurance umbrella sits a few different insurance products. There’s one life insurance product in particular though that is perfect for protecting your family, and that’s family income benefit.
What is family income benefit?
Family income benefit is different from other life insurance products as it doesn’t pay out a lump sum when the policyholder passes away. Instead it provides a regular tax-free income to the beneficiaries on either a monthly or quarterly basis, to cover household and living costs and to make sure that your family can continue living in some sort of state of normality after a loss. It can also pay out in the event of serious illness, and not just death. So if you or your partner have to stop working because of a serious diagnosis, you’ve still got some money coming in to keep things afloat.
So, how does it work? When you take out your family income benefit policy, you decide how long you’d like your policy – or ‘term’ – to last. As a parent, it’s probably a good idea to opt for this to be the length of time until your children are likely to be financially independent; so perhaps 15-18 years. Should you ever need to claim on your policy, you’ll receive regular payments as opposed to a lump sum, meaning no one is left to deal with a large, overwhelming sum of money. The cash in the bank is manageable and budgeting becomes simple.
Family income benefit vs other insurance products
You might be weighing up the pros and cons between family income benefit and term life insurance. If you were to take out term life insurance, it will pay out the full amount no matter how far along into the policy term you are, unlike some other insurance products. And because it usually gets paid in a lump sum, it’s great for covering large costs such as paying off a mortgage.
Family income benefit is much better suited for covering living costs; food on the table, petrol in the cars, school uniforms can be purchased and perhaps driving lessons paid for to get the children on their feet when the time comes. Family income benefit is pretty similar to income protection, which you may have also heard of. Income protection covers you if you are unable to work through illness or injury, however family income benefit is different in that it only pays out if the insured person passes away or is diagnosed with a serious illness.
As a parent, all you want to do is protect your children, right? Although being armed with plasters for a fall in the playground, and being there to wipe their tears when they’re sad, having the right life insurance in place to protect them when you’re no longer able to really is the ultimate superhero move. Don’t put it off any longer!