What is family income benefit?
Family income benefit (FIB) is a type of decreasing term life insurance that pays a regular monthly (or annual) income to your beneficiaries if you die during the policy term — rather than the lump sum paid by standard life insurance.
How does family income benefit work?
You choose a monthly benefit amount and a policy term. If you die during the term, your family receives that monthly amount for the remainder of the term. For example, if you have a 20-year FIB policy paying £2,000/month and you die in year 5, your family receives £2,000/month for the remaining 15 years.
Who is family income benefit best suited to?
- Families with young children where a regular income is more useful than a lump sum
- People whose main financial concern is replacing their income — rather than clearing a mortgage
- People looking for a more affordable alternative to large lump sum policies
- Stay-at-home parents looking to cover the cost of childcare and household costs if they die
How much does family income benefit cost?
FIB is typically cheaper than equivalent lump sum term life insurance because the potential payout decreases over time (later claims result in fewer payments). A healthy non-smoking 35-year-old can typically get £2,000/month of FIB for around £10–£20/month.
Family income benefit vs term life insurance
Neither product is universally better — it depends on your financial goals:
- Term life insurance (lump sum): Better for clearing a mortgage, covering large debts, or leaving a flexible sum for beneficiaries to manage
- Family income benefit: Better for replacing a regular income, preventing beneficiaries from mismanaging a large sum, and keeping premiums low
Many families combine both products — a decreasing term policy to cover the mortgage and a FIB policy to replace income.
Is family income benefit paid tax-free?
Yes — payments from a personal family income benefit policy are tax-free. Writing the policy in trust ensures payments bypass probate and reach your family quickly.
Frequently Asked Questions
Family income benefit is a type of life insurance, but instead of paying a lump sum it pays a regular monthly income to your family for the remainder of the policy term if you die.
Payments continue from the date of death until the end of the policy term. If you die near the end of the term, only a short period of payments is made.
Yes — writing FIB in trust ensures payments go directly to your beneficiaries without going through probate, and outside your estate for inheritance tax purposes.