Family Income Benefit
Gives your family a tax-free lump sum or monthly income if you were to pass away.
If something happened to you, would your family have the regular income they need to keep life running as normal?
Family Income Benefit pays a tax-free monthly income, or a lump sum, to your loved ones if you were to pass away, helping cover everyday bills and costs for as long as they need it.
At V Finances, we take the time to understand your circumstances so we can match you with cover that genuinely fits your individual needs.
What is Family Income Benefit?
A lot of people have Life Insurance for their mortgage balance but may not consider that even without a mortgage there are still a lot of bills to pay and costs that need to be covered.
Family Income Benefit is a type of life cover that pays a tax-free monthly income for a set period, rather than a lump sum. The level of cover is agreed between you and your adviser and can be tailored to suit your needs.
This could be enough to cover essential household costs, giving your partner the option to take time off work to care for the children. It could also help fund future expenses such as school/university fees, or simply provide additional financial support to ease the impact during a difficult time.
The cost of this type of cover is often very reasonable and is well worth considering as part of your overall financial protection.
Who needs Family Income Benefit?
Family Income Benefit is particularly suited to families with young children or where one partner is the main earner.
It provides your dependants with a tax-free monthly income in the event of your death. This income can be used to meet a wide range of ongoing expenses, from childcare and household bills to mortgage or rent payments and other financial commitments.
What is a Terminal Illness benefit?
Some insurers include what is known as a terminal illness benefit as part of their Family Income Benefit cover.
This allows you to start receiving the monthly payments before death if you are diagnosed with a terminal illness that meets the policy definition and are not expected to live longer than 12 months.
How does Family Income Benefit work?
Family Income Benefit is structured as a monthly income paid over a set period. For example, £2,000 per month over 20 years would provide £24,000 per year, equating to a total of £480,000 across the full term.
As each month passes, the total remaining value reduces. After one month, the remaining benefit would be £478,000, and with 10 years remaining, it would be £240,000.
Because the potential payout decreases over time, Family Income Benefit can be a more cost-effective way of protecting your family compared to a level term life insurance policy.
How much cover do you need?
Having a policy that covers your essential expenses can help ensure your loved ones are not left facing financial strain on one income alone.
How much does Family Income Benefit cost?
That all depends on how much cover you need. Cost is dictated by your age, smoker status, occupation, health status, how much cover you need and how long you need it for.
Once your cover starts, you will need to pay by monthly direct debit to keep the policy active.
Does the cost increase over time?
We only recommend policies that have guaranteed premiums. This means that the monthly cost is the same through the whole policy term.
If you have a policy where the cover amount increases with inflation, then your premiums will also increase due to inflation but not due to any claims or changes to your health.
What is a non-weighted premium?
A non-weighted premium is where the broker does not add any additional margin to the insurer’s price beyond the commission already paid by the provider. This means you are paying the insurer’s standard premium, with no extra uplift applied.
At V Finances, we only use non-weighted premiums, as this ensures the best possible outcome for our clients. By not applying any additional charges, we can offer the same level of cover, with the same insurer and policy term, at a lower monthly cost than brokers who use weighted pricing.
By contrast, a weighted premium includes an additional margin set by the broker, increasing the overall cost of the policy without enhancing the level of cover.
How do I tell the insurer who I want to benefit from my Family Income Benefit?
When you set up your Family Income Benefit policy, you should designate your beneficiaries (the people you want to receive the proceeds of the policy on your death). This helps to avoid arguments and ensure that the proceeds are distributed according to your wishes. You can choose as many beneficiaries as you want and specify the percentage you would like to leave to each one.
How does a claim work if I'm dead?
When you pass away, it is up to the beneficiaries of your policy to file a claim with the insurance company so that they can receive the death benefit. The insurer will require them to fill out a form as well as send a copy of the death certificate. The insurance company will need to assess the validity of the claim before they can pay out and they will sometimes require further information or documentation. Once a claim has been paid out, there will be no further premiums to pay to the insurer as the policy will have finished.
How do I apply for cover?
You will need to answer a medical questionnaire as the insurer needs to know what risk they are insuring and whether they can offer you terms. We will offer you the choice of going through the medical questionnaire with us or some insurers will let us send you a link to fill it out yourself.
If you have any pre-existing conditions, it is worth having information to hand before applying for cover as the insurer may need to know dates of diagnosis/treatment, names of medication etc. You should also know your current height and weight.
Why should I use a protection broker like V Finances?
We have over a quarter of a century of experience in giving tailored advice specific to your circumstances.
We have established relationships with insurers and can check any pre-existing conditions in advance of an application to ensure we find the best fit for you.
We will look after all of the process from start to finish and keep you updated every step of the way.
We are regulated and authorised by the Financial Conduct Authority, so you get the same protection as if you were going direct to an insurer but with the added bonus that we search for the best deal across the insurers we use.
