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WHAT IS FAMILY INCOME INSURANCE?
Family income insurance pays a regular tax free income to
your dependants if
you die during the term of your policy. The income benefit is paid for the remaining term of the policy. So, for example, if you took out a ten year policy and died after five years the income would be paid to your dependants for the remaining five years then stop.
Family income insurance is exactly like term insurance, except that it pays a regular income rather than a lump sum. Also, like term insurance there is no investment element,
so if you are alive at the end of the term you will receive nothing back.
HOW DOES THE POLICY WORK?
- The income cover remains level throughout the plan term unless you include the indexation option.
- The income benefit is paid following your death until the end of the policy term.
- The income is paid either monthly, quarterly or yearly.
- You can take out cover on your life or add your partner as a joint life policy.
- With a joint life policy the sum assured is paid on the first death or on diagnosis of a terminal illness if this option is included in your policy. Most policies now
include terminal illness benefit so if you are diagnosed with a terminal illness the policy will pay out while you are still alive.
BUYING TIPS
- Check that the policy has terminal illness benefit included.
This is a valuable extra which will pay the insurance amount early if you suffer a terminal illness, allowing you to make arrangements for your dependants while you are still alive.
- Can the policy be set up in trust? This will avoid any delay in the money going to your dependants.
- Can waiver of premium benefit be included in your plan. This is a valuable extra which, if you become too ill to work for a number of months, will ensure your cover
continues without you having to pay the premiums.
- A valuable feature of some policies is counselling for your family if you die?
- Check that the premiums are `Guaranteed“. This means the premiums are guaranteed to remain the same throughout the term of your policy. This is opposed to
`Reviewable“ premiums which, as the name suggests, are reviewed usually every 5 years and can increase dramatically.
- If you are looking for family income insurance and critical illness cover, you can make big savings by buying a combined policy. These only pay out one lump sum rather than
the two that separate policies would pay, if you suffer a critical illness and then die.
THE COST
The cost will depend on a number of factors, the most important being your age, sex,
lifestyle, if you smoke and your general health. Women pay less than men because, on average, they live longer.
£20,000 level family income benefit for Male & Female non-smokers.
POLICY OPTIONS
You can include one or more options to improve the level of protection provided by your policy. Adding any
of these options will increase the premiums.
- Waiver of Premium
If you are unable to work due to illness or injury, your insurance company will continue to pay your
premiums and keep your cover in force.
- Critical Illness Cover
The insurance benefit will be paid if you are diagnosed as having a critical illness covered under the
policy.
- Indexation
Your cover and premiums increase each year to stop inflation eroding the real value of your cover
over time. Without indexation inflation can seriously eat away at the value of the payout. Even at 3% a year the value of your cover will have fallen by 26% after only 10 years.
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