Family Income Benefit
Written by Check Financial · 3 min read
The short answer
Family income benefit is life insurance that pays your family a regular income, rather than one lump sum, if you die during the policy term. The payments continue until the end of the term, so they replace the monthly income your family relies on.
Who It's For
Family income benefit suits families who would struggle with everyday costs if they lost an income. It is often worth considering when:
- You have young children and want cover until they're grown up.
- Your partner would need help with bills, childcare and living costs.
- You'd like your family to receive money in the way they're used to: monthly, like a salary.
- You want meaningful family cover at a lower cost than an equivalent lump sum.
How It Works
- You choose a monthly amount and a term, for example £2,000 a month until your youngest child turns 21.
- You choose single or joint cover. A joint policy covers two people and usually pays on the first death.
- If you die during the term, the insurer pays your family the monthly amount from then until the end of the term.
- The amount can be level or increasing. Increasing payments help them keep up with rising costs.
Because payments only run until the end of the term, the total your family could receive gets smaller as the years pass. That's why it usually costs less than a level lump sum.
Many insurers can add critical illness cover, so the income starts on diagnosis of a covered illness.
How Much Cover, What It Costs and Tax
How much cover. Start with what your family would need each month to keep going: housing costs, bills, childcare and everyday spending. Then take off any income they would still have.
What it costs. The price depends mainly on your age, health and smoking status, the monthly amount and the length of the policy. It also depends on whether the amount is level or increasing, whether the cover is single or joint, and whether critical illness cover is added.
Tax. The regular payments are normally free of income tax. Writing the policy in trust can mean payments start sooner and stay outside your estate. We'll explain how this works when we set up the policy.
What It Doesn't Do
- It doesn't pay a lump sum for clearing a mortgage or other large debts. For that, see decreasing term or level term.
- It only pays until the end of the term. If you die late in the term, your family receives payments for a shorter time.
- It doesn't pay anything if you outlive the term, and you can't cash it in.
- A joint policy pays only once.
Real Scenario
Example scenario, not a real client
Replacing a Monthly Salary, Not Just Paying a Sum
A couple with two young children want their family to be able to keep up with the bills if either of them died.
Outcome: They take out family income benefit to pay a monthly amount until their youngest turns 21. It sits alongside the decreasing term cover on their mortgage.
Common Questions
Can my family take a lump sum instead?+
Can the payments rise with inflation?+
How long should the term be?+
Can I have this alongside other life insurance?+
How is this different from level term?+
Related Guides
Getting Married or Having a Child?
The protection you and/or your family should be thinking about at major life events.
Read guide →Level Term Life Insurance
Level term life insurance pays a fixed lump sum if you die during the policy term. The amount stays the same throughout, so your family knows exactly what they would receive.
Read guide →How Much Life Insurance Do I Need?
A practical framework for working out the right cover amount for your circumstances.
Read guide →This guide is general information, not personal advice. Check Financial Ltd is an appointed representative of Capital Protect Ltd, authorised and regulated by the Financial Conduct Authority.