Jargon Buster - Definition of Family Income Benefit

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Family Income Benefit

is a type of life insurance or critical illness policy whereby the sum assured is paid out as a tax free income instead of a lump sum. The benefit usually pays out a monthly income, however some policies can pay out annually, bi-annually or quarterly.

The aim of a Family Income Benefit policy is to provide a low cost method of ensuring that you or your family has an income if you needed to claim for life insurance or critical illness insurance. The policies are usually quite cheap as they present a lower risk than lump sum payouts (decreasing and level term) to the insurers.

One typical example where this benefit is used with life insurance is to ensure that private school fees are paid for your children in the event of your death. It should be noted the this form of policy should not be used to cover mortgage or loan payments as you would usually pay interest on these, this would mean that you would need more cover than on a level or decreasing term policy and therefore your premiums would likely be higher.

Please note that all definitions are intended for general guidance only. For official and current definitions you should always double check your policy wording.

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