Whilst you may recognise the benefits that insurance policies could deliver for you and your family, we fully understand that there are likely to be many demands on your income stream. If cost is an issue, then do consider these two products that may better suit your pocket.
Family Income Benefit
General life cover that pays out a lump sum (if a valid claim is made) is often in place to help settle the outstanding mortgage. That’s a great help, but for the partner left behind and their children, what about ongoing everyday items such as food, clothes, utility bills, childcare, or other expenses like holidays and university costs?
This is where a Family Income Benefit plan could deliver much-needed support. In the event of death, it would provide a regular tax-free income for your loved ones from the time of the claim to the end of the plan term.
It’s often taken out over a 10 to 20-year term, or whatever may be appropriate in your circumstances. The idea is that should you have a valid claim, then it’s in place to pay out until the children have grown up.
It is generally viewed as a good value plan. This is because the potential ‘total’ payout over time decreases the further through the policy you get, which is reflected in a lower premium cost.
How it works
If you took out, for example, a 20-year term, which was set up to pay out £20,000/year and it was claimed against after one year, then the family would receive £20,000/year for the next 19 years, equating to a total payout of £380,000 (if no index-linking).
However, if for the same plan, there wasn’t a claim until 18 years into the policy term, the total payout would be just £40,000. If, fortunately, there was no claim at all within the 20-year period, then the policy simply runs the whole term without any payout.
Shorter-Term Income Protection
Income Protection is designed to pay out a tax-free monthly sum in the event that you can’t work due to illness or injury.. However, if you’re concerned about minimising your outlay, then a shorter-term version is also available, which could still deliver important financial support (if still off work) for generally up to two years.
Analysis by Zurich, an insurer, set out that this type of Income Protection cover for a 35-year-old professional earning the average salary of £27,000, and wanting to protect 50% of their net income may only cost the equivalent of one takeaway coffee a week across the course of each month, for up to two years cover.
Finding the extra pounds…
Putting aside the money to fund a Protection plan may be easier than you think when you consider all those little items we may take for granted, like the odd drink or a magazine. Whilst we don’t expect you to give up all of life’s little luxuries, if you cut back on certain treats you’d be surprised by how much you might save. It could be more than you need to cover the cost of a protection policy.
Please do get in touch to hear more.
As with all insurance policies, terms, conditions and exclusions will apply.
Please talk to us to see if we can help you plan your retirement. Get in touch with us on 01609 760960. Or arrange a call back and one of our mortgage brokers will be happy to help.
Reference – BL101 – Jun – 20
The content of this article is for general information only and should not be considered advice. Professional advice relating to your individual circumstances should always be sought prior to making any decisions or taking any action. All details were correct at the time of writing.