Family Income Protection
Family Income Protection (otherwise known as Family Income Benefit Insurance) is a type of Life Insurance, the only difference being that the benefit is paid out on a monthly basis. The purpose of the policy is to provide an income to loved ones should the insured pass away. This policy is often taken out in conjunction with a standard life insurance policy because the benefits of it will be used for different purposes.
In the event of the insured passing away any subsequent claim against the life insurance would provide a lump sum (the amount having been specified by the applicant at point of taking out the policy). The recipient will often have immediate financial responsibilities such as funeral costs or an outstanding mortgage to clear. Due to the circumstances by which this money has been received it is also not uncommon for the money to be used for holidays or other significant purchases and there is a risk of the money being spent quicker than anticipated.
This is where the Family Income Benefit Insurance would have its place. It would continue to provide financial support in smaller, more manageable amounts which would often be used more practically to cover the essential costs of living. Policies are available until age 90 (on next birthday) however, the term of the policy is often arranged so it expires once the insured expects their children to be financially independent. This makes the policy as cost effective as possible while children are still financially dependent.
How does it work
The cost of Family Income Benefit Insurance is often comparatively low in comparison to Life Insurance. Policies will pay out the agreed monthly sum for the length of the policy, so should a claim be paid close to the start date of the policy the total pay-out will be considerably higher than if a claim is made towards the end of the term.