A different way to protect your family
Most life insurance pays one large sum. Family income benefit pays a set amount each month instead, much like a salary. If you died during the policy, your family would receive that income every month from the claim until the policy's end date.
Many families find a monthly sum easier to plan around. It replaces the money that used to arrive each payday, so the household budget can carry on in much the same shape. Nobody has to decide how to invest a large payout or make it last.
It also takes some pressure off a grieving partner. Big money decisions are hard to make in the months after a death, and a steady income gives your family time to think before making changes to work, childcare or where they live.
Why it often costs less
The amount your family would receive depends on when a claim happens. A claim in the first year means many years of payments. A claim near the end means only a few. The insurer's potential payout falls over time, much as it does with decreasing term cover, and the premium reflects that.
That makes family income benefit a sensible way to protect a young family on a tight budget. You can set an income that matches what your household needs each month and pick a term that ends when your youngest child should be independent.
The trade-off is that the cover shrinks with time. If your family's needs grow, perhaps with another baby or a bigger home, the policy will not grow with them. Reviewing your cover after each big change keeps the plan in step with your life, and we are happy to run that review with you.
Setting the income and the term
Start with your monthly outgoings: housing, bills, food, childcare and anything else your family would need. Take away any income your partner would still have, along with any regular payments from a workplace pension scheme. The gap is the monthly benefit to aim for, and we can help you work it out line by line.
For the term, pick the year your youngest child turns eighteen or twenty-one, or the year you plan to stop working. Some parents add a few years to cover further education. Remember that the income stops when the term ends, so it suits a need with a clear finish line.
- Level income stays the same throughout the policy
- Index-linked income rises each year, usually in line with an inflation measure
- Index-linked premiums rise too, so check how that fits your budget
Using it alongside other cover
Family income benefit works well as part of a plan. Many parents pair it with decreasing cover for the mortgage. The decreasing policy clears the home loan, and the family income benefit covers everyday living costs.
You can also add critical illness cover to some family income benefit policies, so the income starts on diagnosis of a listed condition. A stay-at-home parent can benefit too, since the income could pay for childcare and help around the home if that parent died.
Trusts and family income benefit
You can place a family income benefit policy in trust, as you can with lump-sum cover. The trustees then receive the payments and use them for the people you named. That can help if your children are young or your family situation is complex.
A trust can also keep the benefit outside your estate for inheritance tax and avoid delays from probate. Without a trust, the payments may have to wait until your estate is sorted out, which can take months. We will explain how a trust would work with your policy before you apply, and help you choose trustees you can rely on.
How Hi Tomorrow helps
Family income benefit is easy to overlook, and not every adviser mentions it. We will explain how it compares with level or decreasing lump-sum cover for your family, and we will show you both prices so you can see which gives the better fit.
Once you have chosen, we compare the insurers on our panel, help you with the application and set up the trust if you want one. If your family ever needs to claim, we will help them start the payments.