Frustratingly, the less that you can afford life insurance, the more that you need it. Many people in the UK are living ‘hand to mouth’, with their essential outgoings barely being covered by their income, and with little or no savings to fall back on.
If you are in this position, and have a young family, you may sometimes wonder what would happen to your children if something were to happen to you. Then before you have finished that thought a new thought probably takes its place – that for you to sort out your life insurance properly would cost way beyond your budget.
Help is at hand in the form of the little-known product: ‘Family Income Benefit’.
What is Family Income Benefit? (FIB)
This is the cheapest and most effective way of ensuring the long term security of your family if you were to die. The main difference between FIB and the more conventional sort of insurance policy is that it pays out a regular income to your family in the event of your death (as opposed to a lump sum).
How much does Family Income Benefit cost?
Let’s look at some real examples. The following figures apply to a 30 year-old female non-smoker.
Traditional Lump Sum Life Insurance
- £200,000 life insurance
- Term of 25 years
- Cost = £8.04 per month
Family Income Benefit
- £15,000 per year life insurance
- Term of 25 years
- Cost = £7.71 per month
The figures do not look very different – however, there is a very practical difference that could give you real peace of mind.
In the first example, if the subject were to die aged 30, her family would receive a lump sum of £200,000. That would need to last perhaps 20 years +, while the children are financially dependent.
In the second example, her family would receive 25 years’ worth of £15,000 – which adds up to £375,000! Not bad for 0.26p a day…
Of course, no one wants to think of the unthinkable, but if nothing else a small investment now could afford you peace of mind.
Henrietta Oxlade is an Independent Financial Planner with Radcliffe & Newlands and MyFamilyClub’s in-house finance sage! She has been advising individual clients since March 1988, which is why many of her clients consider her part of the family. If you want to contact Henrietta, email us on [email protected] and we’ll put you in touch.