Family Income Benefit
Although many people understand the need for life cover, The effect on a family's income if the main earner were to die would be severe. One form of cover that can be used to replace income in the event of death is Family Income Benefit. Also known as FIB, this type of policy provides life cover to replace income.
Family income benefit differs slightly from other types of cover such as level term assurance. Rather than your family receiving lump cash sum if you were to die, FIB pays a series of monthly tax-free payments.
Before you apply for the policy you will need to decide for how long you wish to be covered for and the level of income you need to cover. If you have a family it would usually be advisable to set the term of the insurance to finish once your children are no longer financially dependent on you.
It is possible to set up a joint policy, that covers two people for example husband and wife.
If you die during the term of the policy the insurance company will continue to pay income to your beneficiaries until the end of the policy. The closer to the end of the term the fewer number of payments that will be made.
When a Family Income Benefit policy expires, it has no value. This means that if you do not die within the term, you will not receive any money back.
FIB is a cheap and affordable form of life cover, when compared to level term assurance or Critical illness cover. Costs of cover will vary from provider to provider. Independent Financial Advisers have the ability to look at the whole market and choose the policy that will be most suitable to you. Premiums for Family Income benefit are usually guaranteed through the term; however it is worth checking to ensure this is the case.
Tax Implications
If you are married then usually the benefits would be paid to your spouse tax free. However it is important that the policy is set up correctly. This is especially important if you are not married.
In some cases it might be worth putting the policy in Trust. This will ensure the benefits are paid to the correct person. There could also be tax advantages to having the policy written under trust. We would recommend seeking independent advice, from an appropriately qualified adviser to ensure that is carried out correctly.
Summary
Family Income Benefit provides a way of protecting your family and your income in the event of death. This is a cheap and affordable form of life cover. If you would like more information on this type of cover please contact us.
