When it comes to arranging protection policies for your clients, advisers often default to discussing either income protection or critical illness cover, and it’s clear to see why. Both policies are incredibly important and work in a mutually beneficial manner to ensure you and your family are covered financially when you are confronted with the unexpected. But there is another policy available, which works in a very similar manner but is very rarely discussed or promoted by advisers, and that is family income benefit.
Most brokers and advisers will probably have, at the very least, a basic idea of what family income benefit is and understand what it does. But despite its numerous advantages, the policy might not be pushed by advisers as intensely when compared to income protection and critical illness cover, while some advisers may not choose to discuss it at all. In this article, we will examine exactly why that is, while seeking to change your mind and encourage you to make family income benefit a much stronger part of your proposition as an adviser, so that you can provide your clients with all the relevant options during your next discussions.
What is Family Income Benefit?
Often times, the reason advisers aren’t recommending family income benefit policies to their clients is because they simply aren’t as informed on the policy as they are compared to others, such as income protection and critical illness cover. So what actually is family income benefit and how does it benefit your clients? At its core, family income benefit is a policy that can be arranged to help you and your family replace lost income in the event of the policy holders death. Upon the death of the policy holder, the family income benefit arrangement will begin paying out a monthly sum that lasts until the initial term concludes. This means that in the unfortunate event of the client’s death, their family is still able to maintain a certain lifestyle and be supported financially.
There are a number of reasons why a client may be interested in family income benefit, with younger couples especially being suitable. Divorcees are also often beneficiaries of this type of policy, offering coverage of the monthly maintenance payments that are agreed upon by separated couples. The sum paid to the dependents of the policy, oftentimes a spouse and children, will vary depending on the arrangement you make as an adviser but will nonetheless offer much needed coverage to those who were financially dependent on the insured.
What is the Difference Between Family Income Benefit and Income Protection?
As stated previously, a major reason family income benefit is not discussed with clients is because it falls to the wayside of its generally more popular sibling, income protection. While similar in concept, there are a few key differences between the two policies which makes it worthwhile to have the conversation with your clients, not only because of its suitability for a wide demographic of clients you are sure to be in contact with, but also due to the upcoming Consumer Duty act putting a much greater responsibility on you as an adviser to ensure your clients are informed about all the different choices they have available to them.
The most notable difference between family income benefit and income protection is perhaps the condition for which the payment is issued. Income protection only seeks to provide financial support while the insured is unable to work, covering a percentage of their income until they can return to work. In comparison, family income benefit pays out in the unfortunate event of the insureds passing, providing your dependents with regular financial support. The other key difference between the two policies is the way in which payment is issued, with income protection payouts coming in the form of a single lump sum figure, as opposed to family income benefits monthly income support.
Obviously, both policies have their mutual benefits as well as their significant differences, but both are remarkably useful options to have at your disposal from a client’s perspective, so it is essential that as an adviser you provide them with both the understanding and the option.
Get in Contact with our Panel
If you’re reading this and think to yourself that maybe family income benefit policies are something you want to make more prominent as a part of your proposition, then we highly recommend getting in contact with the following lenders on our panel: