Family Income Protection

More commonly known as Family Income Benefit, it is one of the least expensive forms of Life Insurance and differs from most other types in that it is designed to pay the benefit as an income rather than a lump sum.

The fact that the cover (sum assured) is paid in regular instalments means that the risk to the Insurer is decreasing over the term chosen which makes Family Income Benefit cheaper than Level Term Life Insurance where the risk to the insurer is the same throughout the term of the plan.

In the event of a claim, income can be paid monthly, quarterly or annually and under current rules the income is tax-free, This makes it ideal for family protection where a family are looking to insure the main bread winner over for a specific term, for example to his her or her retirement age.

Family Income Benefit can also include Critical Illness Insurance which is designed to pay the selected income if the policy holder is diagnosed with a Critical Illness within the chosen term. Critical Illness conditions vary from insurer to insurer but in general include such conditions as Cancer, Heart Attack and stroke, etc. In addition to these "Core Conditions", applicants can also select comprehensive cover which usually includes 25 to 30 additional conditions.

Although Level Term Life Assurance is perhaps the most popular choice for Family Protection, the difficulty for most successful claimants is how to generate an income from the cash lump sum. For simplicity, most people tend to place the proceeds of the policy in a Bank or Building Society deposit account from which they take a regular amount of interest as income. This could lead to the interest generated being subject to tax and would have to be declared via Self Assessment.

Family Income Benefit therefore should be considered when looking to effect insurance for Family Protection as it is a low cost, tax efficient solution.