Family income benefit insurance pays a monthly income if the policyholder dies whilst the policy is in force. The monthly income will continue at the level specified in the policy until the policy’s termination date. These payments can either be index linked or flat rate. If the policyholder lives to the end of the policy’s term, no benefit is payable.
Family income benefit insurance policies can be held by one policyholder (a single policy) or by two policyholders (a joint policy). In the case of a joint policy, the policy will commence paying out at the death of either policyholder. If both policyholders die whilst the policy is in force, the policy will still only pay out once per month.[citation needed]
Family income benefit insurance is primarily used to ensure that a family’s income is maintained at an acceptable level if the main income provider or providers were to die. It can also be used within divorce settlements to ensure that agreed monthly support payment will continue until a given date.
Family income benefit insurance does not involve any investment and the policy has no surrender value at any stage.
Family income benefit insurance can also be combined with life insurance, mortgage life insurance and critical illness insurance as part of a package of insurances to provide financial protection for the family.
Family income benefit insurance is popular in the UK but is relatively unknown in other parts of the world.
The sale of family income benefit insurance in the UK is regulated by the Financial Services Authority.
See also
Term life insurance
Terminal illness insurance