When considering life insurance, covering your mortgage is usually the first port of call, the minimum requirement. It's good to know that, should the worst happen, your family will be able to stay in the family home and not have to worry about mortgage payments in the future. But what will they do for income? Of course, your income has gone. How will your family earn an income and continue as before? This is what Family Income Benefit is designed for.
A policy that covers the day-to-day living expenses is usually sufficient. Remember though, if you have a policy that clears the mortgage if you died, you wouldn't need to cover the monthly mortgage payment as it wouldn't exist anymore.
As you are looking to provide an income to your dependents if you're not around, a policy that pays an income until they become financial dependent is typical. Perhaps when the children leave school or University...
If your monthly living expenses are £1,200 and your youngest child is 4, then a Family Income Benefit policy with a sum assured of £1,200 per month over 18 years (at the end of University) may be appropriate.
For the above policy, for a non-smoking male aged 35, the premium would be less than £10 per month.
The cost of Family Income Benefit is surprising low. That's because the risk to the insurer gets smaller and smaller all the time; it's a bit like Decreasing Term Assurance. Imagine a policy that pays £1,000 per month with a term of 10 years. If the insured person were to die straight away the insurance company will have to pay the income for the next 10 years. However, if the person died in 9 years time, the company would only pay out £1,000 per month for one year.
For people who want to provide an income for their dependents should they die prematurely.
For someone that wants to cover their debts and/or earnings against being diagnosed with a critical illness.