1. Consider an income policy instead of a lump sum
Most people know that life cover pays out a lump sum if you die. But far less know that you can buy cover that pays a regular tax free income instead of a lump sum. Its official name is Family Income Benefit and is often cheaper than the more common Level Term lump sum payout option. So why would an income be better than a lump sum?
Many people who take out a life insurance policy simply want to provide an income for their family to replace the earnings lost if they died prematurely. But many policies are bought with a lump sum benefit requiring the surviving family to find a suitable savings or investment vehicle to generate an ongoing income. In addition, the interest generated from a lump sum is taxable whereas the income from a family income benefit policy is paid tax free.
For many people not used to managing large amounts of money, suddenly having to find the right savings account or investment can prove an additional burden at an already distressing time. This is where Family Income Benefit can offer the best of both worlds.
2. Consider a reducing policy for mortgage life cover
One of...
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