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Family Income Benefit

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First Time Buyers, Family Income Benefit

What are the main features of a family income benefit policy?

This type of policy pays a monthly income for the surviving members of the family. You choose the length of the policy and the amount of income you would like each month. It’s as simple as that.

What is a family income plan?

It is a life insurance policy designed to replace your lost income to protect your finances.

What’s the difference between family income benefit and level term life insurance?

A lot of people do take level term life insurance , which pays a lump sum if you were to die during the length of the policy. It means you know exactly how much your family will receive.  

The trouble with this type of policy, though,  is that people can go a bit crazy when they get that lump sum arriving in the bank. It’s difficult to budget for the future. One option is to invest it, to give yourself a monthly income. 

But if you had family income benefit it’s simpler – you know how much is going to arrive in your bank each month and how long for. That makes it much easier to budget.

Is family income benefit taxable? 

Not in the UK, no. There’s no tax on the money you receive each month. 

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Is family income benefit a decreasing term product?

Yes, in a way it is. If you took a policy for 20 years, paying £2,000 per month, if you died in year one the policy would pay out for 19 years. 

But if you died in year fifteen it would only pay out for the remaining five years – so your family would receive a lot less in total. So in that way it is a benefit that decreases. 

What does family income benefit cost?

That’s the all important question. It all varies: how long you take the policy out for, how much you want to be covered for, and how old you are. There’s lots of different factors.

So it’s very difficult to answer how much it is going to be – we need to work it all out for you, but that’s what we are here for. It’s generally cheaper than a life insurance policy – level term life cover would almost always be more expensive. 

How can a mortgage broker help if somebody is looking for family income benefit?

One thing we haven’t mentioned is that you can also add critical illness cover to this policy – so that’s another factor to consider. 

It’s our job to explain how this type of cover works, whether it will suit your situation and if there’s anything else you should consider. 

Your home may be repossessed if you do not keep up repayments on your mortgage.

The FCA does not regulate some forms of tax planning and for tax planning & investments we act as introducers only.

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