Kerina Bradburn talks about inexpensive ways to arrange life assurance protection for your family:
- It is not insurance that pays you an income if you’re sick
- It is not a state benefit
Family income benefit (FIB) is a type of insurance that pays a tax free income usually monthly or annually to a named beneficiary for an agreed number of years, in the event of the policyholder dying before the insurance term ends.
This type of policy is actually the cheapest form of life insurance and is aimed at meeting certain needs.
It is different to normal term assurance, which is paid as a lump sum. A family income benefit policy provides regular tax-free payments to meet the regular bills so the family can concentrate on the emotional impact that the loss of a loved one has.
So what is best? A lump sum or an income? Or Both?
- For home-owners:
Have a term assurance lump sum to cover the big things such as mortgage and then have an FIB plan that provides a regular tax free income to pay the bills, childcare, school and university.
- For those renting:
A big lump sum is not required to clear a mortgage so have an FIB to provide a regular tax free income to pay the rent and all of the bills, childcare, school and university for a set term.
Who would benefit from such a plan?
If the worst happens and a parent dies, the last thing the remaining parent needs is to be worrying about how they will manage or invest large sums of money to pay the family’s bills.
FIB is also good for families with little previous experience of investing large sums of money and where there might be a risk of the money running out before the children have grown up.
FIB is very useful when parents have separated and the parents do not want to leave big lump sums but want to leave their child a specific income if they’re not around to see them all the way through to University and out the other side.
Finally, if a decision is made to take an income initially, it may be possible to get this commuted to a lump sum at a later date if the individual is better placed at that point to make more informed and less emotional decisions.
This information is provided strictly for general consideration only. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned about the content hereof and any such action or inaction. Professional advice is necessary for every case.
Kerina Bradburn MLIBF DipFA