Protection  

What is the place of family income benefit?

This article is part of
Guide to financial resilience and protection

"Lump-sum payments can give a grieving family challenges in budgeting, while receiving the benefits monthly removes the impulse to blow the funds on unnecessary items, and ensures the household running expenditures can continue to be paid, which is what the policy was set up to cover."

AIG Life says family income benefit can be useful in different scenarios, including:

  1. Family with young children: A family income benefit policy could be particularly important to a family with young children. If one of the parents is diagnosed with a terminal illness or dies, it may help to protect and maintain the family’s lifestyle by paying for things such as childcare and utility bills. It can ease the financial pressure on remaining family members should the worst happen and allow them to concentrate on supporting each other.
  2. Single parents: If a single parent were to die or be diagnosed with a terminal illness, family income benefit can help secure the child’s or children’s financial future by providing their new guardian with a regular monthly income. This may help cover their day-to-day expenses such as food, clothes and school supplies.
  3. Full time carer: Family income benefit may also suit someone who has become their loved one’s full time carer. Having this in place means that if your client is no longer around, there is a monthly income available to pay for things such as private home care visits or to help towards paying the utility bills.

Moreover, there can be some flexibility over the payout, as Paterson explains: "Most providers will include living benefits, either as standard or as an option.

"This allows the insured to access some of the cover before death on the diagnosis of terminal illness and, in some cases, on the diagnosis of a specific critical illness or the need to pay for chronic care."

Additional services

According to Alan Lakey, founder of CI Expert and adviser for Highclere Financial Services: "Family income benefit is the best-value family income replacement available.

"The cost is around 50 per cent less than a level term plan."

While family income benefit can be positioned as a slightly cheaper alternative to term or whole-of-life insurance, it still comes with a host of added-value benefits wrapped up into the plan. 

For example, most family income benefit comes with services such as remote GP services for the family, access to personal nurse advisers, mental health and wellbeing support and bereavement support for children and adults.

As Mehta explains: "A policy is no longer just about the day of the claim: it's about everyday use to give clients that moment of internal comfort when they need it most."

Dunlop adds: "The days of insurance policies simply being a letter that is put into a drawer, with the hope of never having to take it out again, are gone."

Of course, before starting any conversation about family income benefit or other forms of life insurance, it is always worth checking the death-in-service benefits a client might have from their employer.

In some cases this could be a high multiple of their salary, and if they are secure in their employment, it might not be necessary at this stage to take out standard life insurance.

They may also be eligible for up to 12 months' sick pay from their employer, which is also worth taking into consideration and may help in any decisions they make about the sort of cover they need and how much it will cost. 

simoney.kyriakou@ft.com