Life insurance
Family income benefit: life cover paid as a monthly income
Instead of one lump sum, the policy pays an income every month until the term ends. Pick a claim year to see what the family would receive in total.
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Family income benefit: what a claim pays
Example, not your result yet· change a figure to see yours
Paid out in total
£360,000
| Years of payments left | 15 |
| Claim in year 1 | £480,000 |
| Claim in the last year | £24,000 |
Payments run from the claim to the end of the term, so the total falls as the term goes on.
Family income benefit is a form of term life insurance that replaces income rather than paying a lump sum. If the insured person dies during the term, the family receives a set amount each month from the claim until the term ends. A policy paying £2,000 a month over 20 years pays £480,000 if the claim comes in the first year, £240,000 if it comes after ten years and £24,000 in the last year. Because the insurer’s total exposure falls every month, the premium is usually lower than for level cover of the same starting total. It matches the shape of what a family loses when an earner dies: a salary paid month by month until the children are grown. Many policies let the income rise each year with inflation, at a higher premium.
Rates read and sums checked by Radif Partners · Editorial policy · How the figures are worked out
The total falls as the term runs
The table follows a policy of £2,000 a month over 20 years. Each row is a claim in a different year. What the family receives is the monthly sum times the months left, so the policy is worth most at the start, when the children are youngest, and least near the end, when they are close to independence. That is exactly the need it is built for.
| Claim in | Total paid to the family | Payments run for |
|---|---|---|
| Year 1 | £480,000 | 20 years |
| Year 6 | £360,000 | 15 years |
| Year 11 | £240,000 | 10 years |
| Year 16 | £120,000 | 5 years |
| Year 20 | £24,000 | 1 years |
Against a lump sum policy
A level term policy of £480,000 would pay that full sum whenever the claim happens. In the last years of the term it pays far more than the family needs, and the insurer charges for that. Family income benefit pays only what the remaining years require. The trade-off is flexibility: a lump sum can clear a mortgage, fund a move or be invested, while a monthly income cannot do any of those without a conversion option. Many families combine the two: decreasing cover for the mortgage and family income benefit for living costs.
How likely a claim is
For a man of 36 over 20 years, the ONS life tables give a 5.5% chance of dying within the term. The policy is a small regular cost against that probability. The odds at other ages are on the life insurance by age page.
What the state adds in the first months
A married partner with a child for whom Child Benefit is paid may receive Bereavement Support Payment of £3,500 at once and £350 a month for 18 months. It overlaps the start of a family income benefit claim and then stops, so a monthly benefit chosen against long-term spending is rarely changed by it.
Points to read in the policy
Whether the monthly benefit is level or increases each year, and by what index; whether payments continue to the end of the term or for a fixed number of years; whether the family can take the rest as a lump sum; and whether the policy can be written in trust, which keeps the payments outside probate. Income protection, which pays when the insured person is alive but cannot work, is a separate policy: its benefits are free of income tax under section 735 of ITTOIA 2005 when you pay the premiums yourself.
Choosing the monthly figure
The usual starting point is the take-home income the family would lose, less what would carry on: a partner’s own earnings, any survivor’s pension, and in the first 18 months the Bereavement Support Payment where it is due. Childcare often rises after a death, because the surviving parent may need to work longer hours, so some households add it rather than subtract it. Because the benefit is a fixed monthly sum, a policy that rises each year keeps more of its value over a long term, at a higher premium. The calculator above shows what a claim would pay in total at any year of the term.