Help - Family Income benefit

Liz_the_Whizz

My DH and I both have death in service benefits with our pension schemes which provide a lump sum in the event of death.

However, while visiting a certain bank to open a cash ISA the other day, which insisted on me enduring an interview with a tied advisor, the guy happened to mention family income benefit which I brushed aside.

Having now looked into it independently, I realise that we have missed a trick here as we have ongoing commitments (6 yo DS) if either of us was to die.

Followed MSE advice and looked up quotes on Cavendish Direct and Moneyworld.

Just wanted a bit of clarification on how you work out how much cover you need:

as I understand it, payments from life assurance/family income benefit are tax-free, so presumably you only need to cover your net income?

is the sum affected in any way by your circumstances (eg if your income level changes, the sum paid out in the event of death remains the same)?

I realise that no advice can be given, but I'd be grateful for any experiences or pitfalls to avoid.

Thanks

dunstonh

FIB is cheaper than level term (generically). It has advantages if you die early in the term but later in the term it is not as good (i.e. two years to go until end date and you die and it only pays two years of income).

You would generally use it as a low cost option though or where an explicit income need is required. (Rather than using a level term assurance and assuming 5% of that sum = income). However, my personal preference would be for Level term unless you are on a tight budget. This is because something like over 70% of all FIB claims are commuted to lump sum by the beneficiary (at a loss) because they prefer it that way.