In this article I will discuss the benefits of a little known plan called the family income plan which is also known as family income benefit. I will explain how the plan works and further I will go into how this type of plan can benefit the average client looking for life insurance.

First of all it is important to understand the various needs for life insurance and therefore have a greater understanding of were exactly the likes of family income plans fit within good financial planning.

There are a couple of main reasons as to why it makes sense to get life insurance cover. The principle ones would of course be to protect your family or to protect your loans or mortgages. Mortgage and loan protection is simple. You owe a specific amount of money, and therefore logic dictates that you need to take out sufficient financial cover to protect that amount of money in the event of your death. If it is also financially viable, it is advisable to also take out critical illness cover. Family income benefit does not protect mortgages or loans, and the reasons for that will be explained here in due course.

If protecting your family is your main priority, then family income benefit is a good way to go. The idea is that you are arranging for adequate financial protection to replace the salary you would have earned for your family members in the event of your passing. You therefore need to ascertain how much money you believe your family will need to live on comfortably after you die.

A lot of people tend to use their incomes as a good benchmark to work from when ascertaining what level of cover they actually need. The reason for this is during life you may support your family to the tune of 25,000 for example, so it is fair to say that in the event you die they would need 25,000 per annum in order to maintain their standard of living.

In the past, the only form of life insurance plan available was a lump sum insurance policy. This basically meant that you had to work out what lump sum was needed to be accrued in order to provide your family with a yearly income of 25000 after your death. However, no-one can predict the future, and so with fluctuating interest rates and rates of inflation prone to change, this method of life insurance was far from ideal. Also, from a financial viewpoint, it was a risky option and again not the best solution.

Along came family income benefit. In short this plan pays out the annual required benefit. So if you wanted 30,000 per annum you took the plan out with that level of sum assured and then if the worst happens the plan pays out 30,000 per annum.

However, the plan was improved so as to work even better by including something called indexation. Each year, the amount of money insured would be increased slightly to keep in line with the possibility of inflation so as to allow for fluctuations in the future. That way your family would be provided for irrespective of the changing interest rates. What is more, even once the policy had been claimed, it would increase on a yearly basis so as to keep performing for your family after you had gone.

So in summary if you are looking for family protection and it is a level of income you are looking to protect, which 99% of time it really should be, then family income benefit is generally the right plan for you. It will ensure you have adequate cover to protect your family in the event of your death and it will continue into the future with inflation protection as a result of the indexation benefit available as an option within the plan.

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