What is family income benefit insurance?
Family income benefit (or ‘FIB‘) is a type of life insurance, however, unlike traditional policies that pay out a lump sum, family income benefit provides beneficiaries instead with a regular, fixed, tax-free income.
Regular income payments run from the date of death, until the end of the policy term, as chosen at the outset by the policyholder. No benefit is issued if a claim has not been made before the policy expires.
Family income benefit can be well suited to new parents with young children, wanting an affordable way to ensure their dependants are adequately provisioned for. Regular payments could replace a lost income and help with long-term budgeting.
How does family income benefit work?
Before you buy family income benefit, you need to establish how much income your dependents require each year.
Ideally, this would cover all family living costs, not just now but in the future too.
Then you need to decide how long you require the cover to last, (known as the ‘term‘). Often policyholders ensure the term lasts until their children are financially independent.
Normally this tax-free income is paid monthly, although it can be paid quarterly. This can help with the long-term budgeting of day-to-day living expenses.
To ensure your family income benefit payments meet your dependant’s needs, both now and in the future, it may be a good idea to link it to indexation.
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