Most of us have heard of life insurance, which will pay out a tax free cash lump sum on death which can be used by our loved ones to meet any financial needs such as repaying outstanding mortgages or looking after our children. However, many people are unaware of another option for death cover.

Family Income Benefit is a type of protection which also covers you should you pass away or suffer a specified terminal illness, but instead of a tax free cash lump sum, this type of plan will pay out a tax free regular income for a specified term. This type of plan can also be useful for your loved ones to meet their financial needs upon your death and can be particularly beneficial for those with dependent children.

The income received from Family Income Benefit could be used by your family to ease the burden of bills and everyday expenditure or to cover any ongoing childcare fees. Knowing these outgoings are covered can ease the burden of of financial worries and can allow your family to focus on supporting each other during an already difficult time.

The amount of monthly income to be paid out after your passing can be either fixed (the income will remain level throughout the term of the plan) or it can be set to increase or decrease as time goes on to factor in rising costs (i.e. inflation). This decision will be largely dictated by your individual circumstances and requirements and our advisers can guide your through this decision to ensure that your Family Income Benefit plan is appropriate for you.

Family Income Benefit could also be of use to single parents. Most parents have plans in place regarding whom will take care of their children should they pass away, however a Family Income Benefit plan could be used to pay out a regular income to your child's new guardian to cover some of the day to day expenses associated with raising a child.

As with regular life insurance, critical illness cover can also be added to Family Income Benefit plans which allows for the regular income to begin to be paid upon the diagnosis of a specified critical illness (the specific diagnoses which will result in a successful claim will vary depending on the provider chosen). There would be additional costs associated with this which our advisers would explain to you in detail to ensure you are able to make the correct decision for you and your family.

Why choose a Family Income Benefit plan rather than a typical life cover plan?

Family Income Benefit plans are typically lower cost than traditional life cover. This is due to the fact that the longer you live, the less monthly payments will be received which is more beneficial to the insurer. The affordability of such plans can be highly beneficial and cost less than a typical life cover plan. but it can also compliment any existing life cover that you may have which may be used to clear your outstanding mortgage liability.

Also, as the benefit is paid out as a regular monthly income rather than a larger lump sum, your loved ones would not need to manage/invest a large lump sum, they would simply receive their regular payments to use towards the cost of living until the end of the plan. 

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. It does not constitute advice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor. 

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority. 

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