Family income benefit: Protecting your children when you’re gone

The average cost of raising a child in the UK in 2020, from birth to age 18, was £152,747 according to the Child Poverty Action Group, and the cost only goes up for a single-parent family. Are you confident that your children would be taken care of should something happen to you? While day-to-day expenses might seem manageable in the short term, family income benefit is a kind of insurance that grants you peace of mind that those expenses would be covered in the longer term should you pass away.

Family income benefit vs life insurance 

Family income benefit is similar to life insurance, but the key difference is that with life insurance your beneficiaries receive a lump sum.

With family income benefit, your beneficiaries receive an annual tax-free income for the rest of the term. So, for instance, you might wish to take out a 25-year term to support your young children until they are self-sufficient, and you’d calculate your contribution based on how much they would require per annum until that time.

With this annual payout, your beneficiary wouldn’t need to handle the responsibility of receiving a large lump sum and then figuring out how to make it last for as long as needed.

Can you have life cover and family income benefit? 

Like with a decreasing term life insurance policy, the total amount your family will receive (the total number of payouts) will go down as the years pass. This makes family income benefit an ideal accompaniment to life insurance, as opposed to a replacement for it./p>

Family income benefit should be seen as a cover for the expenses that don't go away, like medical bills, school fees and council taxes, as opposed to the type of expense that a single life insurance lump sum could cover, like a mortgage.

When deciding whether you need a family income benefit, ask yourself, “How much would my family require annually to maintain the same lifestyle as they do now, if I was no longer around? For how long would they need that before they were able to support themselves?

What is the difference between income protection and family income benefit? 

Income protection provides an income should you be unable to continue with your work due to accident, illness or injury. Family income protection pays out if you are no longer around. So, this would be a separate type of cover.

Can you put a family income benefit plan in a trust?

Yes, you can put a family income benefit plan in a trust.

What does family income benefit cost and can the premiums remain fixed?  

Family income benefit premiums can remain fixed, and they will be calculated based on a few factors such as: 

• Your age
• Your health and BMI status
• Whether you're a smoker
• The income you want the policy to pay out
• The term of the policy

All of those factors get taken into account before an insurance company is able to work out what that premium would be.

Protect your family from an uncertain future

People often resent the funds they have to pay out every month, but insurance should not be seen as a grudge purchase. It’s an act of care and an opportunity to protect your loved ones from any future financial worries. With a family income benefit, you are assured that your family will receive a set amount each year, following a successful claim with the insurer. You can trust that they will be cared for after you're gone.

To learn more about family income benefit and other ways of protecting yourself and your family from uncertainty, get in touch with our Wealth team at wealth@sableinternational.com or call us on +44 (0) 20 7759 7519.