Family income protection policies are also known as family income benefit (FIB). These are term assurance policies specifically designed to meet the needs of parents with (or planning) children.
They provide for an income payable from the date of death until a fixed time in the future (e.g. the youngest child’s 25th birthday).
So, if you have a £20,000 per annum 25-year FIB policy and you die the next week, your family gets £20,000 for 25 years = £500,000 in total.
If you die when the child is 20, your dependants get £20,000 for 5 years = £100,000 in total.
As you can see, this means that the older you get, the less life assurance you actually have. This keeps the costs down.
- FIB policies might have extra options (for example to take account of inflation the income might rise each year).
- You might be given the option of having a lump sum instead of an income. (The lump sum would be the discounted value of the income. In essence, if given the choice, you look at the numbers and make your choice at that time).
- It is normal to opt for a 25 year term if you expect to have more children in the future. This ensures that your future youngest should at least be covered through university. If, however, your children are already at school and no more are planned, clearly shorter terms will be used based on what is actually expected to happen (e.g. is university a likely option, or will they be seeking employment at 16 or 18?).
It is often the case that 2 single life policies are only a little more expensive than a joint life policy. Always get three quotes (father’s life only, mother’s life only, and a joint life one). In order to select the most suitable option for cover, we recommend that you speak to your financial adviser.
With such policies there is no surrender value and cover will cease if premiums are not paid.