What is family protection insurance?
Family Protection, sometimes Family Income Benefit, defines a type of life insurance with the primary agenda of safeguarding the financial future of the family unit in the event of your death.
It’s a type of level term insurance, which ensures a pay-out to your loved ones if you pass away within a specified length of time. A regular monthly premium is expected and cover remains fixed over the course of your insured term. The premium, however, will retain the same value throughout your policy – meaning no sudden, or unexpected, hikes or bumps to pay for.
Where traditional forms of cover pay out a cash lump sum, or benefit, against a claim, family protection insurance affords beneficiaries a stable, tax-free routine income. Rather than a large standalone pay-out, known as a lump sum, beneficiaries are, instead, looked after with a regular income, where payments are provided in fixed instalments.
How does family protection insurance work?
As level term insurance, each policy will contain a window of cover. The length of time specified in your policy is called a term. The policyholder will need to nominate this on activation of their family income benefit. Normally, the term will run until your children become legally and/or financially independent.
The purpose of the benefit, the new income it releases, will need to accommodate to the everyday, routine living costs of your family. This will help to calculate the sum you’re wishing to have insured.
The benefit, called a pay-out, is a tax-free monthly, sometimes quarterly, instalment of money.
Futureproofing the family finance
When securing the future-hood of life plans, this is often referred to as contingency planning. It pays to think ahead. Essentially, don’t plan only to your present financial demands, but instead think about how they might change in the future, especially if you’re responsible for dependants (if you have children, for example).
How does my policy pay-out?
There are two ways your funds could be released, depending on the kind of policy you nominate.
- lump sum.
Traditional policies, such as life insurance, will issue a single “lumped” pay-out to the value of the sum assured, payable to the named beneficiaries. This will see the funds held in a policy released as a sizable value.
For family protection insurance, however, the pay-out is provided in the form of an income, with regular instalments paid to your loved ones.
The differences between pay-outs can create something of an advantage for those looking to obtain easy and affordable cover: a monthly income is a tidier sum to budget against, rather than the hassle of managing, investing or looking after a larger sum of cash altogether. A greater pay-out could add up into an unmanageable chore.
Who can get cover?
When completing the application, you can nominate the named policyholder/s to be included in your insurance. A single policy can be taken out under multiple applicants, or you can choose to hold separate policies, depending on the financial ambitions of your insurance.
Can I have multiple policies?
With separate but many policies you’ll likely find the premiums to be more expensive, yet it equates to additional layers of protection. One of the main benefits is how your policies can add up with multiple pay-outs, to the tune of a greater sum assured. This is a popular hack for people trying to get more coverage out of your insurance.
What is a joint policy?
Where a life policy represents the interest of two people.
A policy will pay-out from the passing of one, often the first, named policyholder. Rather than multiple policy payments, a joint policy will cover the passing for one, not both, of the named policyholders.
Who is eligible?
If you’re a UK resident, you can access quotes for family protection insurance. To get the most cost-effective cover, that meets the criteria of your budget, it can feel freeing to browse the market for top deals – using an engine like Life Market can get you where you’re going. Only quicker.
How much family protection insurance do I need?
Ideally, the amount specified in your policy is personal to your family budget.
Your policy should aim to remove, or help ease, the financial upset in the event of your family losing its primary income. The benefit, then, will need to cover your everyday family costs – both now and in the future. When planning your financial resources, consider mapping out the unique demands of your family unit.
To accurately calculate what you might need, think about your family’s total outgoings.
- Do you have an outstanding mortgage debt?
- Do you have any other debts, or unpaid loans?
- Have you thought about covering your funeral expenses?
- What are the daily living costs?
mortgage + debts/loans + any funeral costs = sum assured.
Do I need family protection insurance?
The purpose of this insurance type is to secure the financial future of your loved ones. It is, then, a sensible option for anyone hatching financial plans that involve dependants, such as young children.
Family protection insurance is ideal for families across the UK searching for affordable life insurance to protect their loved ones. Particularly, it’s a strong option for new, young or expecting parents, with matters of the family close to their hearts.
How can I budget well with family insurance?
Not only should considerations be sensitive to the financial demands of your family in the moment, but insurance can answer to your working budget. Affordable life cover isn’t a myth. Premiums will be informed not only by your nominated term lengths, but also the sum assured, or the value of your benefit specified in the policy.
Monthly premiums can be workable into most budgets; it helps to know which tools to use.
Is my benefit taxable?
In short, no.
The pay-out issued against a valid claim is non-taxable for family protection insurance. Unlike other insurances, where tax can impact the total pay-out, with a family income benefit your payments are issued monthly. On a traditional life policy, a pay-out would be lumped into the overall deceased’s estate, unless written in trust. Inheritance tax is sometimes avoidable if you write your policy in trust.
Writing family protection insurance in trust
The advantages of writing your policy in trust are twofold:
- You can quicken the pay out, by circumventing probate.
- You can reduce the chances of taxation against your sum assured (inheritance tax is 40%).
How much does family protection insurance cost?
This insurance type is recognised by insurers as a lower risk, which is why it has a reputation for being cost-friendly for families managing tight budgets.
Most insurance types are evaluated against similar risk-metrics. (Risk, your proximity to various dangers, will usually top the watchlist of itemised factors.) Yet, there is much more to consider, such as:
- Smoking status.
- Medical history/ conditions.
- Family history.
- Lifestyle Choices.
- Your age.
- Desired policy term.
- Sum assured, or desired value of benefit.
The cost of a premium, similar to other types of life cover, is predicted against your likelihood to issue a claim.
Yet, regarding cost, you can choose between “guaranteed” or “reviewable” premiums.
- What is a Guaranteed Premium?
The value, or cost, against your monthly premiums doesn’t rise over the term of your policy.
- What is a Reviewable Premium?
In some instances, premiums begin cheaper, but can be subjected to change over the course of the policy. That enables insurers the power to edit cost accordingly – there may be increases to your premiums at the discretion of the insurer
What can I spend my benefit on?
Normally, you receive a benefit as a kind of proxy income. Those who recieve your policy’s fund will have full spending power. Where the benefit exists to lift the financial loss of a loved one, the money would likely cover the daily living costs of the family.
What is the best life insurance for a family?
Life insurance is for the whole family.
The tricky part is figuring out who needs covering, how much for, and for how long – all essential details in building a policy for a family.
How are family protection insurance & level term life insurance different?
The outcome of a policy, the final pay-out, will look differently.
Level term life insurance describes a policy where an insured sum is confined to a term length and against a set value, or sum assured. The pay-out is issued as a lump sum, or totality of value against the policy’s insured balance.
Life cover policies with these standalone larger pay-outs are beneficial for those looking to secure purchases to the scale of a mortgage, or other bulky loan or debt types.
Unlike this traditional form of cover, family protection insurance pays out as a tidy income to cover the everyday costs of a family unit. It may not be suitable for those big-ticket purchases but can help with the smooth running of everyday finance and budgeting, especially in the routine minutiae of family expense.
If you nominate your policy to oblige a decreasing term, then your premium can drop annually. This is because a policy’s value “decreases” over the course of its term. It’s a favourite for those handling debts that are predicted to devalue in-time, such as a mortgage.
It’s important to note that both types are term-based, meaning that your policy runs through a specified length of time.
You can, however, nominate multiple polices. If your angling to “layer” your cover to ensure greater protection, then you can build out a profile of separate yet parallel polices for a larger total pay-out.
You could, for example, nominate a level term life insurance policy to tackle the weightier debts, the likes of your mortgage, meanwhile leaning on the safety of your family protection benefit to secure the everyday expenses of the family.
With level term policies you could access affordable premiums from £5/month within lengthy terms of up to 40 years to secure cover up to the value of £1,000,000. *
How are family protection insurance & income protection different?
Whereas most types of insurances provide financial safety against types of death, income protection pays out whilst you’re injured or during a period of poor health. Income protection allows you to focus on recovery, eliminating the financial tensions of managing your existing debts.
Freedom with on-going payments, secure big terms & keep it in the budget.
Adding value with critical illness cover
Most policies can include an option to cover critical illness. This will extend your protection to safeguard against serious illnesses. This is beneficial in protecting your finances from poor health, leaving you with time to recover.
It’s likely that this will increase your monthly premiums yet will leave you with more layers of cover.
Terminal illness cover
Most policies will contain terminal illness cover.
In certain instances, you can access your pay-out early if you become diagnosed with a terminal illness.
This is beneficial in helping to remain financially secure in a moment of hardship.
When is the best time to buy family protection insurance?
Thinking about life begets the itch to keep it safe. And securing your financial resources, especially future proofing your money, is an important project dear to any family.
Commonly, the major life moments that motivate family protection insurance include:
- Young parents wanting to secure their everyday finances.
- Expecting parents hatching future plans to keep their money safe.
- Family’s with limited savings and tight budgets.
Is family protection insurance worth it?
Family matters are close to the heart, if not the closest.
Life cover options, similar to family protection insurance, are often described as a kind of contingency planning. This is a savvy way of looking forward and protecting your loved ones against any uncertainties that could upset your larger life plans.
Making sensible plans for your finances, especially for the future, is no trivial task. You might have tight budgets, and so being mindful of your money is a primary focus. Often people opt for a family income benefit precisely for its affordability.
Where can I buy a policy?
With every search and inquiry, nudging you closer to a life policy, it’s worth reflecting on the journey. Not every insurer will quute you the same cost, nor offer up the same policy specifics. And so, empowering your search using a comparison tool could open up countless opportunities to save (on time & money).
How to apply for family protection insurance?
You can smartly research the answers to your gnawing inquiries here.
It’s a quick, simple path to cover.
- What do I want from my cover? Own a purpose behind your purchase and this will make shopping for insurance less of a chore.
- Compare the market. Empower your search with our free online quote form to reach deals in minutes.
- Complete an application. Discover financial confidence when hatching plans for the future using insurance.
Compare family protection insurance
Every moment with the family counts.
So, we’ve devised a quick way of cutting through the noise of the market to connect you with top quotes. Clip through jargon and get to the heart of your search with Life Market – a free, smart comparison tool that quickly surveys the insurance market to bring you closer to affordable cover rates.