What is the Value of Dad in 2009?

June 16th 2009

Family Income Benefit is one of the least expensive forms of Life Insurance and differs from most other types in that it is designed to pay the benefit as a regular, tax-free, monthly income for you and your dependants rather than a lump sum. It is particularly attractive to those who like to know they have a regular monthly income for a fixed term and would rather not have to worry about complex investment decisions to make the most of a lump sum payout.
 

Low Cost Family Protection
The fact that the amount of cover (sum assured) is paid in regular instalments means that the risk to the Insurer is decreasing over the term chosen which makes Family Income Benefit cheaper than Level Term Life Insurance where the risk to the Insurer is the same throughout the term of the plan.

Regular Tax Free Income Payments
In the event of a claim, income can be paid monthly, quarterly or annually and under current rules the income is tax-free. This makes it ideal for Family Protection, where a family are looking to insure the main bread winner over a specific term, for example until children leave full time education.

Extra Cover Options
Family Income Benefit can also include Critical Illness insurance which is designed to pay the selected income if the policyholder is diagnosed with a Critical Illness within the chosen term. Critical Illness conditions vary from insurer to insurer but in general include such conditions as Cancer, Heart Attack, and Stroke etc. In addition to these “Core Conditions” applicants can also select comprehensive cover which usually includes 25 to 30 additional conditions.

Although Level Term Life Insurance is perhaps the most popular choice for Family Protection, the difficulty for most successful claimants is how to generate an income from the cash lump sum. For simplicity most people tend to place the proceeds of the policy in a Bank or Building Society deposit from which they take a regular amount of interest as income. The problem with this is that the interest generated will be subject to tax and for higher rate tax payers, will have to be declared via Self Assessment.

Family Income Benefit therefore should be considered when looking to effect insurance for Family Protection. Family Income Benefit is a low cost, tax efficient solution to Family Protection.