Should I Get a Family Income Benefit Policy?

Deciding whether to get a family income benefit policy depends on your individual needs and financial situation. This type of policy provides regular income payments to your family if you pass away during the term of the policy. It's designed to replace lost income and help maintain your family's standard of living after you die. If you have dependents who rely on your income, a family income benefit policy can offer peace of mind and financial security.

A family income benefit policy is a type of life insurance that pays out a regular income rather than a lump sum if the policyholder dies during the policy term. The payments continue until the end of the policy term, providing a steady stream of income for the beneficiaries. This can help cover living expenses, mortgage payments, and other financial needs, ensuring that your family can continue to meet their financial obligations during difficult times without disruption.

Family income benefit is particularly suitable in the following scenarios:

• Dependents - if you have young children or dependents who rely on your income, this policy ensures they receive regular financial support
• Budgeting - regular payments can be easier for your family to manage compared to a lump sum, helping them budget for ongoing expenses
• Outstanding debts - if you have a mortgage or other significant debts, the regular income can help cover these costs over time

Family income benefit is a form of life insurance, but it differs from traditional life insurance, which typically pays out a lump sum. Some insurers offer family income benefit as an add-on to a standard life insurance policy, allowing you to combine the benefits of both. This means you can have the security of a lump sum payout and the additional assurance of regular income payments for your family.

Some family income benefit policies offer critical illness cover as an additional feature. This means that if you’re diagnosed with a specified critical illness during the policy term, the policy will start paying out the regular income benefit immediately. This can provide financial support during your illness, helping cover medical expenses and other costs, and continues to provide for your family if you pass away.

The income received from a family income benefit policy is generally not subject to Income Tax. However, the tax treatment can vary depending on individual circumstances and changes in tax laws. It's always a good idea to consult with a tax advisor to understand the specific tax implications for your situation.

Placing a family income benefit policy in trust can have several advantages:

• Speed of payment: benefits can be paid out more quickly, as they don’t go through probate
• Tax-efficiency: payments made through a trust are typically not subject to Inheritance Tax
• Control: you can specify how the benefits are managed and distributed, ensuring that the income is used according to your wishes.

Setting up a trust can be complex, so it's advisable to seek professional advice to ensure it is done correctly and in the best interests of your beneficiaries.

For personalized advice and assistance in selecting the right insurance coverage, including family income benefit policies, contact John Charcol Mortgage Broker on 0333 363 6507. Our experienced advisors can help you understand your options and find the best protection plan for your unique circumstances.