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Protect Your Family with Family Income Benefit Insurance

Last updated: June 15, 2023

Hudson Rose team in Cheltenham

If you have children, it’s so important to think about how your family will protected in the event that you or your co-parent were to die. It’s not a fun topic but it’s certainly one that shouldn’t be avoided! When considering all the options (and there are many) you may well come across Family Income Benefit Insurance. This is an option that is well worth considering as part of your protection portfolio. Here we explain what it is, how it works and who it’s for.

What is Family Income Benefit Insurance?

Family Income Benefit Insurance is a fixed term insurance policy that only pays out if you die within the term. The policy pays out a monthly tax-free sum that is designed to replace the deceased’s income and cover the cost of mortgage, bills, childcare etc.

Most people fix the term to coincide with their children coming of age and no longer being financially dependent on their parent. So, for example, if you take out the policy when your child is one, you would typically make the term twenty years so that you are covered until they are twenty one.

It is important to reiterate that a family income benefit policy only pays out if you die within the term and then only pays until the end of the fixed term. For example if you have a twenty year term and you die in year two, the policy will pay a monthly sum for the remaining eighteen years, but if you die fifteen years into the term, it will only pay the monthly sum for the remaining five years.

Important considerations when taking out a family income benefit policy

Most importantly, you need to think about how much money your family will need if you die. Ideally you want to cover as much of your current income as possible to ensure that the mortgage, bills, childcare, car finance etc. will all be covered. However, be aware that this will directly affect the cost of the policy.

You should also consider the length of the term. It is usual to fix the term until your youngest child turns twenty one but you could lower this to your youngest child turning eighteen or lengthen it beyond twenty one. Bear in mind that the longer the term, the more expensive the policy will be.

HR team member working in Cirencester Office

Will family income benefit insurance give me enough cover?

We always recommend considering a range of insurance products so that you are covered for multiple scenarios. Whilst family income benefit insurance is a great policy, it will usually only pay out if there is a death. It is actually far more likely that whilst your children are young you might have an accident or illness that could prevent you from working and therefore impact on your income so it’s worth considering an Income Protection or Critical Illness Policy to cover such an eventuality. Also, the family income benefit insurance will only cover you for the duration of the agreed term so you will want to consider a life insurance policy that would pay out a large lump sum if you die. This would also cover you beyond the end of the family income benefit term. For more info on the other types of insurance, check out our youtube channel.

When it comes to insurance, always get professional advice

Feeling totally confused by all the different insurance policies on offer? It can certainly be overwhelming and expensive so it’s well worth speaking to an insurance advisor who should be able to match up your individual needs with your monthly budget and find the right portfolio of cover for you.

Hudson Rose team talking in Cheltenham office

Hudson Rose are an established team of expert mortgage advisors who will do all the research and heavy lifting to ensure the process is smooth and simple. So why not Give us a call today on 0330 122 9920 or book in for a chat (free of charge) with one of our expert advisors!

Check out more blogs from the Hudson Rose band

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Hudson Rose Services Ltd is an Appointed Representative of Stonebridge Mortgage Solutions Ltd, which is authorised and regulated by the Financial Conduct Authority.
Hudson Rose Services Ltd, trading as Hudson Rose. Registered Office: 7 Bridge Street, Nailsworth, Stroud, GL6 0AA
Registered Company Number: 11008147 Registered in England. FCA 799302

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