Family Income Benefit
Provide your family with a regular tax-free monthly income if you die, rather than a one-off lump sum.
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Family income benefit (FIB) is a type of life insurance that pays out a regular tax-free income to your family from the date of your death until the end of the policy term. Unlike traditional life insurance (which pays a single lump sum), FIB replaces your salary month by month, making it easier for your family to manage everyday bills, childcare and mortgage payments without having to invest or budget a large sum.
How Family Income Benefit Works
- You choose a monthly or annual benefit amount (e.g. £2,000 per month)
- If you die during the policy term, your family receives that income until the term ends
- The earlier a claim is made, the more your family receives in total
- Payouts are completely tax-free
- Can be written in trust so payments bypass probate and inheritance tax
Why Choose Family Income Benefit?
- Affordable: typically 30–50% cheaper than equivalent level term life insurance
- Mirrors real life: replaces your monthly salary rather than providing a lump sum
- No investment risk: your family doesn't need to manage or invest a large payout
- Ideal for young families: covers the years when your children are dependent
- Can include critical illness: add critical illness cover for extra protection
Who Should Consider Family Income Benefit?
- Parents with young or school-age children
- Families where one parent would need to reduce work hours
- Anyone who wants their family to maintain their current lifestyle
- People who want affordable life cover with high effective payouts
- Couples who rely on both incomes for the household budget
Frequently Asked Questions
How is family income benefit different from life insurance?
Traditional life insurance pays a one-off lump sum when you die. Family income benefit pays a regular monthly or annual income from your death until the end of the policy term. FIB is usually cheaper and can be easier for families to manage than receiving a large lump sum.
Is family income benefit tax-free?
Yes. Payouts from a family income benefit policy are completely tax-free, whether received monthly or annually. If the policy is written in trust, the payments also fall outside your estate for inheritance tax purposes.
Can I combine family income benefit with other cover?
Yes. Many people take FIB alongside a separate lump-sum life insurance policy to cover the mortgage. You can also add critical illness cover to your FIB policy so it pays out if you're diagnosed with a serious illness.
What happens if I die near the end of the policy term?
The closer to the end of the term you die, the less your family will receive in total, because the income only pays until the policy expires. Most policies include a minimum payment guarantee (e.g. 12 months of income regardless of when you die).
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