The Importance of family income protection for your LCS

What is it?

Family income benefit is a type of life insurance known as term insurance, which lasts for a set time known as the term. A family income benefit policy will pay out a monthly tax-free income if you die during the term, until the policy ends.

Family income benefit is a type of life insurance that provides a regular income for your loved ones if something unfortunate is to happen during the term of the plan. There is no cash in value, so if you stop making payments your cover will end.

Most families rely on at least one regular monthly salary to cover their household spending. How would your household cope financially if you lost a source of income? For peace of mind, many people choose a type of life insurance called family income benefit.

How does it work?

The monthly payout from a family income benefit policy is paid from when you die until the end of the term. Once the term ends, cover and any payments stop. So if you take out a 20-year policy and die five years into it, your family will receive a regular monthly income for the remaining 15 years. If you were to die 16 years into the policy, it will pay out for the remaining four years.

How much cover is sufficient?

This will depend on your own circumstances. For example, if you have a young family, you might want cover to run until your children are grown up, using the income for everyday expenses or specific items such as school or university fees.

To decide how much cover you want, work out how much your family is likely to need every month. It’s a good idea to factor in inflation (the rise in the cost of living) when doing your calculations as this can impact the amount you’ll need in the future.

How much does it cost?

Monthly premiums are based on the amount of income you choose, how long you want it for, your age, health and lifestyle. You can typically choose a level income (where the monthly income payment remains the same), or pay more for it to rise by a set amount each year. But for this you usually need to seek professional financial advice.