Let us first consider why it is that one needs life insurance. If you assess the reasons why you need life cover, you may then be able to decide whether or not the family income plan will be suitable for your financial circumstances.

There are a couple of main reasons as to why it makes sense to get life insurance cover. The principle ones would of course be to protect your family or to protect your loans or mortgages. Mortgage and loan protection is simple. You owe a specific amount of money, and therefore logic dictates that you need to take out sufficient financial cover to protect that amount of money in the event of your death. If it is also financially viable, it is advisable to also take out critical illness cover. Family income benefit does not protect mortgages or loans, and the reasons for that will be explained here in due course.

If protecting your family is your main priority, then family income benefit is a good way to go. The idea is that you are arranging for adequate financial protection to replace the salary you would have earned for your family members in the event of your passing. You therefore need to ascertain how much money you believe your family will need to live on comfortably after you die.

Most people use their salary figure to ascertain just how much cover they are going to need to protect their family in the future. Let us say, for example, that you earn 25000 per year. That would therefore mean that you are going to need 25000 worth of cover so that your family can be provided comfortably for in the future in the event of your death.

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.

And so the need for a policy which would pay out the same amount every year led way to the family income plan. If you needed 30000 paid out every year, you took out a policy for that amount, and after death 30000 was guaranteed to be paid out every year thereafter.

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.

And so, if the sort of protection you need is family protection and you have a salary to protect aswell, which is more often than not the case, you should certainly consider taking out family income benefit. Your family will be adequately provided for, and because of the indexation clause included, you can be safe in the knowledge that your family will also be covered in the case of future inflation. Family income benefit is definitely a god way to go.