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Guide to Family Income Benefit Policy

Guest Post:

Thinking of your death might be the last thing on your mind while you’re at the prime of your life. However, as the bread winner of the family, you need to ensure that your family members don’t have to compromise on their lifestyle when you’re not there to provide for them. Setting up the right type of insurance scheme remains crucial in this regard. There is a host of insurance carriers offering varied schemes and it will be your responsibility to make a wise choice, considering your earning, debt to income ratio, the kind of lifestyle that you want your family to lead after your death etc.

In this respect it would be useful to mention that a family income benefit policy can prove to be a cost-effective way of shielding your family against potential financial crisis in your absence. Here, the benefits are paid as monthly or yearly earnings instead of as a lump sum. However, there are some carriers that might as well agree to pay the benefits as lump sum if insisted upon. The benefits will only be received by the family if the policy holder dies within the term of the cover. For instance, if the insured had obtained the cover for 15 years and he dies in the 10th year of the term then his family members will get the benefits for the remaining 5 years. If the insured lives beyond these fifteen years then the family members won’t be getting any money. Though the absence of a lump sum might be a reason for concern initially, if you start looking at its benefits closely, you might as well be convinced to secure it. Here is a rundown of the features of the policy that an insurance seeker should know about.

Features and Benefits

Aside from the ones mentioned above, here are the key features of the family income benefit policy:

If the policy holder is diagnosed with a serious illness, he can opt for a critical illness cover as well, so that his family receives benefits even when he is ill.

The flexibility of the cover implies that it can be sought both by single and joint applicants.  In this regard, it might be suggested that couples seeking a joint life cover should consider two single covers instead of a joint life cover. Two single covers might prove to be a little more expensive than a single joint cover, however, in case something happens to both the partners, their children will be entitled to more money from two separate policies instead of one joint plan.

The benefits of the policy can be enjoyed by children in case of divorces as well. Additionally, if you are providing for a distant elderly relative of yours, the cover will provide protection to him/her in case of your absence.

You can either obtain a level monthly benefit or else increasing monthly benefit. The former implies that benefits paid out each month to the family remains the same, while the latter indicates that the payout will increase at around 5 percent each year to protect your family against inflation.



The choice of the plan should be based on your own income, the age of your children (so that both of them are protected till the time they are grown up) and the type of lifestyle you want your family to maintain in your absence among other things.


Author : Sam Payn is an experienced finance blogger who participates in major debates in relevant forums as well.

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