The benefits of a family income plan

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The benefits of a family income plan

Author: ChrisClare | Total views: 36 | Word Count: 647 | Category: Organizing Finance | Date: Mar 4th 2008

You may have heard recently about family income plans as a form of life insurance. In these next few paragraphs, we will aim to explain just what exactly a family income plan, or family income benefit as it is also known, is, and how it may of benefit ti you as a life insurance plan.

First of all it is important to understand the various needs for life insurance and therefore have a greater understanding of were exactly the likes of family income plans fit within good financial planning.

There is generally only a handful of reasons one would have life insurance. The obvious ones are family protection and loans or mortgage protection. Mortgage protection or loan is quite simple you have a liability of a certain amount of money, so best advice dictates that you should insure exactly that amount in the event of death, and if funds allow in the event of a critical illness. Family income benefit does not cater for mortgage or loan protection for reasons that will be later explained.

Protecting your family is where family income benefit comes into play. The basic description of it is that it is there to adequately protect your family financially should you die. In order to meet this need, you first of all need to have a figure in mind. That figure needs to reflect the amount of money you think your family will need to continue to live in the manner to which they are accustomed should you pass away and no longer be able to provide for them.

So an ideal place to start when assessing how much cover you need is to look at your annual salary. If you are currently earning 25000 per year, you will need to arrange a policy that will pay out 25000 per year to your family after your death. By arranging this amount of cover, your family will be able to live in the same financial comfort that they did when you were still alive and earning your yearly income.

Before the family income plans existed the only real form of life insurance policy available was in lump sum form. The difficulty with this sort of policy is that you had to work out one lump figure which you felt would be sufficient to protect your family after your death and pay out 25000 per annum. Also, when taking into account the changing rates of inflation and the unpredictable returns on investments, this lump sum figure could be very difficult to calculate. It could, and often did, prove very risky.

Along came family income benefit. In short this plan pays out the annual required benefit. So if you wanted 30,000 per annum you took the plan out with that level of sum assured and then if the worst happens the plan pays out 30,000 per annum.

Another facet called indexation was also introduced in order to make the policy function even more efficiently. Indexation means that the value of the fund would be increased each year to allow for inflation. In this way, no matter how inflation has changed the market, your family would be guaranteed to be adequately provided for. The policy would also continue to rise once it had been paid out, so your family will continue to benefit from this aspect of the plan after your death.

Most life insurance plans should be providing cover for your salary, and if you also need your family protected, then you should probably make the family income plan the policy for you. You can be sure that your family is not only protected directly after your death, but with the indexation option included, you also know that the level of protection will increase proportionately for them in the years to come. After all, peace of mind for your family is exactly what life insurance should be.

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You may have heard recently about family income plans as a form of life insurance. In these next few paragraphs, we will aim to explain just what exactly a family income plan, or family income benefit as it is also known, is, and how it may of benefit ti you as a life insurance plan. 
First of all it is important to understand the various needs for life insurance and therefore have a greater understanding of were exactly the likes of family income plans fit within good financial planning. 
There is generally only a handful of reasons one would have life insurance. The obvious ones are family protection and loans or mortgage protection. Mortgage protection or loan is quite simple you have a liability of a certain amount of money, so best advice dictates that you should insure exactly that amount in the event of death, and if funds allow in the event of a critical illness. Family income benefit does not cater for mortgage or loan protection for reasons that will be later explained. 
Protecting your family is where family income benefit comes into play. The basic description of it is that it is there to adequately protect your family financially should you die. In order to meet this need, you first of all need to have a figure in mind. That figure needs to reflect the amount of money you think your family will need to continue to live in the manner to which they are accustomed should you pass away and no longer be able to provide for them. 
So an ideal place to start when assessing how much cover you need is to look at your annual salary. If you are currently earning 25000 per year, you will need to arrange a policy that will pay out 25000 per year to your family after your death. By arranging this amount of cover, your family will be able to live in the same financial comfort that they did when you were still alive and earning your yearly income. 
Before the family income plans existed the only real form of life insurance policy available was in lump sum form. The difficulty with this sort of policy is that you had to work out one lump figure which you felt would be sufficient to protect your family after your death and pay out 25000 per annum. Also, when taking into account the changing rates of inflation and the unpredictable returns on investments, this lump sum figure could be very difficult to calculate. It could, and often did, prove very risky. 
Along came family income benefit. In short this plan pays out the annual required benefit. So if you wanted 30,000 per annum you took the plan out with that level of sum assured and then if the worst happens the plan pays out 30,000 per annum. 
Another facet called indexation was also introduced in order to make the policy function even more efficiently. Indexation means that the value of the fund would be increased each year to allow for inflation. In this way, no matter how inflation has changed the market, your family would be guaranteed to be adequately provided for. The policy would also continue to rise once it had been paid out, so your family will continue to benefit from this aspect of the plan after your death. 
Most life insurance plans should be providing cover for your salary, and if you also need your family protected, then you should probably make the family income plan the policy for you. You can be sure that your family is not only protected directly after your death, but with the indexation option included, you also know that the level of protection will increase proportionately for them in the years to come. After all, peace of mind for your family is exactly what life insurance should be. Article Source: <a href="http://www.organizingweb.net" target="_blank">OrganizingWeb.net</a> About the Author: Get what you need from your <a href="http://www.life-ins.co.uk">life insurance plan</a> try Invest & Protect for no obligation online low cost quotes for <a href="http://www.life-ins.co.uk">life insurance cover</a> Visit the Uber <a href="http://www.uberarticles.com/home.php?id=112252&p=1065">Article Directory</a> to get a totally unique version of this article for reprint.