A family income benefit or family benefit insurance is a type of coverage that’s quite common in Australia. It provides a tax-free monthly income to the beneficiaries in case the policyholder dies. However, if you as the policyholder die after the term of the insurance, your family and beneficiaries won’t receive a monthly income.
It may sound complex at first, but more people opt for this typical life insurance policies. Read along and discover why.
How does it work?
Family income benefit insurance works almost the same as other life insurance policies. However, this requires little or no investment. Once you purchase it, you are then assured that your family will be protected once you pass away.
However, if the insurance reaches the expiration date or if you pass away after that date, your family won’t receive a monthly income. Compared to others, this is also considered the most cost-effective way to insure your family.
Is a monthly income better than a lump sum?
Because most insurance provide awards you a lump sum, the monthly income provided by family benefit insurance is often criticized. However, it may actually be more attractive than a lump sum option. The monthly income will give your family adequate time to make future plans with certainty. They will also be spared from the interest problems that a lump sum amount often entails.
Other benefits
For most people, this type of insurance is just like any other insurance. On the contrary, it has more to offer. Its benefits are also considered genuine. Here’s a list of the most common reasons why people opt for this type of coverage.
- Available for long term and short term plans
- Low cost and tax free
- Available for single or joint applicants
- Assurance of the monthly finances without any hassle
Can the monthly income increase?
This mainly depends on your insurance provider. Luckily, most providers will allow you to increase the monthly income that your family will receive. This also means higher insurance premiums. If you want to settle for smaller payments, you can choose stable monthly payments. Regardless of your choice, the fact still remains that this type of insurance can provide the needs of your family despite your absence.
Is this fixed insurance?
Yes, family income benefit insurance is a type of fixed insurance policy. That means you cannot make any extensions on the coverage. Because it does not provide flexibility, some people consider this as a drawback. However, other also sees it as a positive aspect.
Extensions mean additional spending. With fixed insurance, you have no choice but to stick with what your current coverage is. That will spare you the temptation of enrolling in extensions that you don’t really need.
Securing your family’s future is important. Hence, investing on insurance will always be worth the money. However, you should always ensure that you’re dealing with a legitimate insurance provider. You’ll have the peace of mind that the insurance you purchased will benefit your family in the future.