What Is Family Income Benefit?
Family income benefit (FIB) is a type of term life insurance that pays a regular tax-free monthly income to your family if you die during the policy term, rather than a single lump sum. The payments continue from the date of your death until the end of the policy term.
For example, if you take out a 25-year FIB policy paying £2,000 per month and die in year 5, your family receives £2,000 per month for the remaining 20 years. If you die in year 20, they receive £2,000 per month for the remaining 5 years.
How Much Does Family Income Benefit Cost?
FIB is often cheaper than equivalent level term cover because the total potential payout decreases as the policy term progresses. Typical costs for £2,000/month over 25 years:
| Age | Non-Smoker (Monthly) | Smoker (Monthly) |
|---|---|---|
| 30 | £8–14 | £18–28 |
| 35 | £11–18 | £24–36 |
| 40 | £16–26 | £34–52 |
The total potential payout from the policy above at year one is £600,000 (25 years × 12 months × £2,000). Getting £600,000 of level term cover would cost significantly more.
FIB vs Level Term vs Decreasing Term
| Feature | Family Income Benefit | Level Term | Decreasing Term |
|---|---|---|---|
| Payout type | Monthly income | One-off lump sum | One-off lump sum (reducing) |
| Payout amount over time | Total reduces (fewer months left) | Stays the same | Reduces |
| Best for | Replacing income | Clearing debts | Repayment mortgage |
| Cost | Often cheapest per £ of initial cover | Mid-range | Cheapest |
| Tax on payout | Income tax free (if in trust) | Tax free (if in trust) | Tax free (if in trust) |
Who Should Consider Family Income Benefit?
- Families with children – FIB replaces your monthly income, covering the day-to-day costs your family relies on: food, bills, childcare, school fees.
- People who worry about lump sum management – Not everyone is comfortable investing or managing a large payout. A monthly income is simpler to budget with.
- Those on a tight budget – FIB often provides the highest total initial cover for the lowest premium.
- Combined with decreasing term – Many advisers recommend pairing decreasing term (for the mortgage) with FIB (for living costs). This is often the most cost-effective protection strategy.
How to Get Family Income Benefit
Most major UK life insurers offer FIB policies, including Aviva, Legal & General, Royal London, Zurich, and Vitality. The application process is the same as standard life insurance – answer health questions, choose your monthly benefit amount and term, and get a quote.
Frequently Asked Questions
Family income benefit is a type of term life insurance that pays your family a regular monthly income from the date of your death until the end of the policy term, rather than a single lump sum.
Yes, if the policy is written in trust. The monthly payments are not subject to income tax. If the policy is not in trust, the payments may form part of your estate and could be subject to inheritance tax.
A healthy 30-year-old non-smoker can get £2,000 per month of cover for around £8–14 per month over 25 years. FIB is often cheaper than equivalent level term cover.
Some insurers allow beneficiaries to commute the remaining monthly payments into a single lump sum. However, this lump sum is usually less than the total of all remaining monthly payments. Check your policy terms.