Family income benefit Vs Decreasing Life Insurance
Family income benefit
A family income benefit policy is designed to support your family for a number of years after your death. A family income benefit policy works in the same way as a regular life insurance policy as it pays out upon death. However, the main difference is instead of paying out a lump sum, it will pay out a regular income across the length of the policy. For example, if you were to take out a policy for 20 years, and you were to die 10 years into the policy, then the policy would pay out a regular income to the beneficiaries for the remaining 10 years. Family income benefit is usually cheaper than regular life insurance, this is mainly due to the fact that there is less chance of it paying out the full amount of cover, in other words, the longer you live the less the company will have to pay out.
If you do not want your family to receive a lump sum of cash upon your death, then family income benefit is the right policy for you, as your family will receive a steady income of cash for the remainder of your policy. However, it is important to remember that if your policy isn’t long enough, or if your policy is close to ending when you pass away, your family will not receive a particularly large pay-out.
Decreasing life insurance
Decreasing life insurance does exactly what the name suggests, each year the amount of cover you would receive from your policy if you were to pass away decreases. This may seem like a negative however decreasing life insurance is used primarily as mortgage cover, as time goes on you will pay off your mortgage more and more each year and therefore require less cover in the event of your death. Another benefit of decreasing life insurance is that it is cheaper than level life insurance as the amount of cover you apply for is unlikely to be the amount of cover that pays out at the end of the term. This type of policy will not generally leave a large sum of money for your family, as the sum of money paid out is designed to be used to pay off the mortgage with little, if anything, left over for personal use, therefore if you are looking for a life insurance policy that will pay out money for your family’s personal use, you will either have to apply for a larger decreasing policy or another type of life insurance e.g. level life insurance or family income benefit.
We also have a number of other life insurance products available if you do not feel that family income benefit or decreasing cover is right for you, visit our life insurance page to find out more
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