Family Income Benefit is a kind of life insurance structured to provide long-term benefits for your loved ones. When a Family Income Benefit policy protects you when you die, you can receive tax-free benefits for the rest of the contract.
The Family Income Benefit functions very similar to Relevant Life Insurance. You take out the cover and pay the premiums for an agreed sum. If you pass away during the policy term, the insurer will pay a monthly benefit to your family. The difference between Life Insurance and Family Income Benefit is how you receive the payout. The beneficiaries get the payment as a single lump sum for Life Insurance. For Family Income Benefit the payment is divided into a more manageable income for the remainder of the policy period. When you die after the benefit period expires, your loved ones won’t get a monthly payout.
Do I Need Family Income Benefit?
Family Income Benefit provides your family with a regular monthly income if you were to pass away or become critically ill. It covers the core monthly expenses of your family, from utilities to grocery stores should you die.
How Much Does Family Income Benefit Cost?
There are a number of factors that will determine the cost of Family Income Benefit, some of which are key policy factors you can control, such as:
Level of cover
The more cover you require the higher the premium for the policy.
Length of cover
The longer the policy term the higher the risk of needing to claim and this is reflected in higher premiums.
The older we are, the greater the risk of passing away during the term of the policy
Your current state of health
Individuals with serious health conditions, especially those that reduce their life expectancy, would usually pay more for life insurance to reflect the greater risk that the insurer takes
Your smoker status
If you smoke, you are at higher risk of developing a serious, fatal health condition and hence insurers would charge more
Lifestyle and hazardous activities
Lifestyle, such as consuming more alcohol than is prescribed regularly or taking part in dangerous activities, may lead an insurer to raise the cost of your cover
Has any of your immediate family ever suffered from a serious and/or inherited illness that can affect you?
Is Family Income Benefit taxable?
The monthly compensation you earn from a Family Income Benefit package is not subject to income tax; it is charged tax-free, and you don’t need to worry about grossing up the benefit.
How much cover should I get and for how long?
This may depend on conditions of your own. For example, if you have a young family, you might want to run cover before your kids are grown up. Use the income for regular expenses or particular things such as school or university fees. To assess how much Family Income Benefit or Relevant Life Insurance you want, figure out how much your family will actually need every month. While making your calculations, it’s a good idea to include inflation (the rise in the cost of living). This can influence the amount you’ll need in future.
For more information on how you can utilise Family Income Benefit, contact a member of our team at WIS Business Protection.