I have a client making a claim on a critical illness (CI) policy. The provider is suggesting they take a lump sum payment rather than the family income benefit (FIB) they originally bought. I realise there are various arguments for each side, but what would be the one that swings it toward FIB?
Andrew Ward
Your Sure
The clear argument here is maintaining the fund allocated to the beneficiary for the required forthcoming years.
This is simple with the way family income benefit is arranged and may be difficult with a lump sum.
If the client is paid a lump sum, they have a huge responsibility to a sudden windfall of unexpected cash - and this requires a lot of planning.
The client could try to allocate a certain amount of money per year for the remainder of the term, for which they needed the life insurance.
But this has its problems as people (understandably) generally will not be as austere as they need to be.
Perhaps they might spend some money on that holiday they always wanted to go on or the new kitchen that they have always wished for and many other wants in their lives (however big or small).
This potentially leaves the beneficiary in financial peril as they will run out of money before they expected to and this may lead to giving up elements of their lifestyle that they have always been accustomed to.
A family income benefit policy will give the beneficiary a stable, known income for the term required on a monthly frequency so it requires no discipline from the client other than on a month to month basis.
The client can forward-plan easily as they know that funds are coming into the household for a set period.
