What is family income benefit?

Family income benefit is a type of life insurance that pays your beneficiaries a regular monthly income (instead of a lump sum) if you die during the policy term.

The monthly payments continue until the end of your policy term, providing ongoing financial support similar to a salary.

Key features:

• Regular monthly payments (not a lump sum)
• Tax-free income for your family
• Typically up to £5,000 per month available
• Cover for a fixed term (e.g., until children finish education)
• Payments stop at the end of the policy term
• Often 20-40% cheaper than equivalent lump sum cover
• Terminal illness cover usually included

Example: If you have a 20-year policy paying £2,000/month and you die 5 years in, your family receives £2,000 every month for the remaining 15 years (total £360,000).

How does family income benefit work?

1. Choose monthly income amount: Decide how much monthly income your family would need (e.g., £2,000)
2. Select policy term: Choose how long cover lasts (e.g., 20 years until children are independent)
3. Pay fixed premiums: Make regular monthly or annual premium payments
4. Claim if needed: If you die, your family receives monthly payments for the remainder of the term
5. Payments continue: Monthly income continues tax-free until the policy end date

Important timing consideration:

The earlier you die in the policy term, the longer the payments last. If you die near the end of the term, fewer payments are made. This is why FIB is cheaper than lump sum cover - the insurer's payout reduces over time.

Who needs family income benefit?

When FIB might not be suitable:

- You need to clear a specific debt (mortgage, loans) - lump sum better

- Family would prefer to invest a large amount themselves

- You want to leave an inheritance

Family income benefit vs lump sum life insurance

FIB vs Lump Sum Comparison

Feature	Family Income Benefit	Lump Sum (Level Term)
Payout type	Monthly income	One-time cash payment
Cost	20-40% cheaper	More expensive
Flexibility	Fixed monthly amount	Full flexibility
Best for	Replacing income	Clearing debts
Total payout	Decreases over time	Always the same
Budgeting	Easy (regular income)	Requires discipline

Both provide tax-free payouts and include terminal illness cover.

Example comparison:

A 35-year-old non-smoker wanting 20 years of protection:

Family Income Benefit: £2,000/month = Maximum total £480,000 (if die immediately) - Cost: ~£15/month

Level Term: £480,000 lump sum - Cost: ~£25/month

FIB costs 40% less but provides equivalent protection if you die early in the term.

Can you combine both?

Yes! Many families use a hybrid approach: smaller lump sum to clear mortgage + FIB to replace ongoing income.