Family income benefit

If something happens to you, family income benefit can give the people you love the financial security they need to cover day-to-day living expenses. Read our helpful guide to find out how it works and whether it’s right for you.

If something happens to you, family income benefit can give the people you love the financial security they need to cover day-to-day living expenses. Read our helpful guide to find out how it works and whether it’s right for you.

Debbie Thompson
Life insurance expert
minute read
Do you know someone who could benefit from this article?
Posted 22 DECEMBER 2020

What is family income benefit? 

Family income benefit, or FIB, is a type of life insurance policy. Where it’s different from standard life insurance is that it pays out a regular monthly income, rather than a lump sum.

You, as a policyholder, will pay a monthly or annual premium, and cover remains in place for a specified length of time. If you were to die during that time, your loved ones would get a tax-free income to help replace your lost earnings.

A family monthly income could help your dependants stay on top of mortgage payments or rent, along with other household bills.

How does family income benefit work?

A family income benefit policy only pays out if you die during the term of the policy. For example, if you took out a 20-year policy and died after five years, your provider would pay an income for the remaining 15 years. If, on the other hand, you died after 18 years, the pay-outs would only last for two years. This is different to a traditional life insurance policy, which pays out an agreed lump sum when the policyholder dies.

Be aware that there’ll be no pay-out of family income benefit if you don’t die during the term of the policy, nor will you get your money back.

What should I consider before taking out family income benefit insurance?

Before you take out family income benefit insurance, you’ll need to think about:

  • How much income your dependants will need. Think about possible future family living costs as well as your current outgoings. 
  • How long you want the cover to last. Often, people who take out family income benefit choose the policy term to run until their children are financially independent. 

How much will family income benefit cost?

Family income benefit is generally considered the most affordable type of life insurance available. That’s because the risk to the insurance provider reduces each year and pay-outs are typically lower than standard life insurance.

As with all life insurance, your monthly premiums will depend on:

  • your age The younger you are, the cheaper family benefit insurance will be as you’re considered less of a risk.
  • the income you want paid The larger the amount you choose, the higher your premiums will be.
  • smoking and medical history Certain health conditions will decrease your life expectancy in the eyes of insurance providers and therefore increase your premiums.

Many family income benefit plans give you the option to include critical illness cover. This means the policy will pay out if you’re diagnosed with a serious illness. If you add this, your premium will be higher.

Who is family income benefit for?

One of the main advantages of FIB is that it doesn’t require your beneficiaries to deal with the complexities of managing and investing a large lump sum of money – as you would with other types of life insurance. They’ll already be dealing with the loss of someone they love, so the last thing they’ll probably want to be thinking about is investing in the stock market or comparing savings accounts.

Family income benefit may appeal to families with young children – particularly where one parent is the primary earner – as it provides a regular income, often with cheaper premiums than other life insurance policies.

You’ll have peace of mind that your loved ones will still be able to cover monthly outgoings like mortgage payments, bills and childcare costs if something happens to you.

Who isn’t family income benefit for?

If you’re looking for a life insurance policy that pays out a considerable amount of money, then family income benefit may not be for you. That’s because the insurance provider only pays out for the remaining term of the policy, so the amount your loved ones get will depend on when you die.

A standard life insurance product, on the other hand, could still pay out the full, agreed lump sum. Many people choose this option so that if they die during the policy term, their loved ones will be able to pay off the mortgage and clear other debts.

So if you’d prefer your family to receive a sizeable one-off payment, it may be worth considering a term life insurance or whole-of-life insurance policy instead. But remember that the premiums are likely to be higher.

Where can I buy family income benefit?

You can’t buy this type of cover on our site, but our partner LifeSearch, a specialist adviser for life insurance, will be able to help you. Give the friendly team a call on 0800 072 1147 (Monday to Thursday 8am-8pm; Friday 8am-7pm; Saturday 9am-2.30pm; Sunday 10am-3.30pm).  

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