28 Nov What Is Family Income Benefit?
What Is Family Income Benefit?
Family income benefit and life insurance are very similar products; however, the primary difference between the two is that with life insurance, your beneficiaries will receive a lump sum payment.
The family income benefit provides your beneficiaries with a yearly income that is exempt from taxation for the duration of the term. You might, for instance, want to purchase a policy with a term of 25 years in order to provide financial support for your young children until the point at which they are able to care for themselves financially. You would calculate your payment depending on how much they require per year until that time.
With this annual payment, your beneficiary wouldn’t have to worry about getting a large sum all at once and then figuring out how to make it last as long as needed.
How does family inome benefit work?
If you pass away within the policy’s term, your children and/or spouse will get regular payouts. However, they will only receive these benefits for the remainder of the policy.
Let’s look at an example. A policyholder with a 40-year term who passes away after 10 years has 30 years remaining on their policy. Beneficiaries therefore receive the agreed-upon amount for the remaining 30 years. This will ensure that your family are able to keep on living the lifestyle they currently live.
How much does family income benefit cost?
The cost of family income benefits depends on a variety of factors such as:
- Your age
- Your health and BMI status
- Whether you’re a smoker
- The income you want the policy to pay out
- The term of the policy
These factors are what insurance companies look at to determine what the premium should be.
If I have a pre-existing medical condition can I get covered?
As with other life insurance policies, your lifestyle and health can have an impact on the family income benefit quote you receive from insurers. However, no medical condition is completely exempt from a family income benefit policy.
Your medical history information, as well as your occupation and other lifestyle characteristics, will be examined.
These can have an impact on the market prices offered to you.
Can I put my family income benefit policy in trust?
All policies are eligible to be in trust.
People choose to write life insurance in trust to decrease the likelihood of having to pay inheritance tax.
This is due to the fact that your insurance is not considered part of your estate. Another advantage is that you avoid the probate stage. This essentially means that your family will receive their money sooner.
Will my cover keep up with the cost of living?
Inflation means that what your dependents require now may increase in the future, especially if you have a long policy term. This could be a problem.
If you want their monthly income benefits to stay up with the cost of living, you must select an inflation-indexed insurance. This is something that’s available however, it will affect the cost of your premiums.