Ross Jackson, Marketing Manager at Royal London looks at the family income benefit option and how it could be one way to help reduce the cost of protection premiums. But also how it can be used to help tailor cover for individual clients through a menu or multi benefit approach to protection.
We’re all familiar with one of the key barriers to people taking out protection – affordability.
In our recent State of the Protection Nation research*, this was the top reason given by consumers for not owning life insurance (29%), critical illness (32%) or income protection (31%).
But protection doesn’t have to cost as much as your clients might think and there are a number of options available to keep the cost down. One of those options is family income benefit.
What is family income benefit?
Family income benefit (FIB) is an inexpensive solution that helps take a load off the client’s mind that, should the worst happen, their family would have a financial coping strategy. Rather than paying out a lump sum on claim, it pays out a regular tax-free income until the end of the plan’s term (tax treatment depends on individual circumstances and may be subject to change in the future).
The total amount paid out by the plan depends on when the claim is made. If it’s made in the early years of the plan, the total pay-out will be more than if they claimed nearer the end of the term of the plan. Because the total pay-out decreases over time, it’s cheaper than an equivalent single lump-sum life insurance plan which runs for the same period.
Why use it?
FIB is a cheaper way for a client to provide their family with an income rather than a lump sum if they were to die or suffer a critical illness. It could be beneficial for clients with young families as they might want the cover to run until their children are grown up. This income could be used to meet everyday expenses or to pay for specific on-going financial commitments such as school or university fees. It’s not appropriate for covering a mortgage or other debts where a lump sum would be required.
Or add it to the menu
Our Personal Menu Plan allows clients to choose to have their cover paid out either as a lump sum, a regular income or a combination of both. You can tailor it to suit their budgets as well as their needs by combining a range of covers for different terms and amounts. For example, combine Life Cover on a lump sum basis to protect the mortgage and then some separate Critical Illness Cover on an income basis to protect those other monthly household bills. This approach also provides valuable cover across a number of possible eventualities.
Support for you
To help you identify and deliver the right plan, we’ve grouped some of our covers into a number of flexible and customisable packages - these could be a good starting point for ideas before you visit a client. But the flexibility of our Menu Plan lets you create your own package from any of our covers, tailoring them to suit your client’s needs and budget.
For more information, visit adviser.royallondon.com/menu
*Royal London, State of the Protection Nation, March 2017.
Tax treatment depends on individual circumstances and may be subject to change in the future.
This page was produced by the advertising department of the Financial Times. The news and editorial staff of the Financial Times had no role in its preparation.
