A family income benefit policy could be suitable for you if you want to give your family earnings to live off when you die, instead of a lump sum of money.
What is a family income benefit policy?
A family income benefit policy is a term life insurance policy that gives out an income, rather than a lump sum.
The said policies are not very common, so you may need to go through an independent financial adviser or broker to look for a policy that offers an income payout.
How does a family income benefit policy work?
You determine an annual benefit and a duration for the policy, also known as the term.
If in case you die during the term, your insurer will reimburse the income that you have chosen to your loved ones for the remaining duration of the term of the policy.
For example, if you took out a 20-year policy and died after 18 years, your insurer would pay out income for the remaining two years.
This is different to a lump sum payment on a life insurance policy, where you choose a larger amount as a one-off payout.
How much does it cost?
Your monthly premiums will depend on:
1. The annual income that you want as a payout: The greater the income you choose, the greater the payments in premiums each month.
2. Your age: The older you get, the more expensive it will be.
3. If you had health issues or have ever smoked: Anything that can have an effect on your health will shorten your life expectancy, and increase how much you pay for premiums for life insurance.
This type of policy usually has cheaper costs than level term life insurance since the amount an insurer pays out reduces throughout the term of the policy.
Is it worth it?
A family income benefit policy could meet your needs if you only wish to reinstate your income when you die. However, it will only pay out until the end of the term of the policy.
A family income benefit policy is a risky option if you are looking for a policy that pays out as much as possible
If you want a policy that pays out as often as possible, a family income benefit policy is an option that is risky.
This is because the insurer only compensates for the outstanding term of the policy, so the amount of money that your loved ones are going to receive will depend on when you die. But if you choose a term life insurance which grants a lump sum payout, you can receive it all if you die during the terms of the policy.