Family Income Benefit (FIB): A Comprehensive Guide
Family Income Benefit (FIB) is a lesser-known but highly valuable form of life insurance that can provide crucial financial support for families if the unexpected happens. In this article, we explain what it is, how it works, who it’s best suited for, and what you should consider when choosing a policy.
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Instead, we work closely with a trusted and regulated partner firm who specialise in protection advice. If you're unsure which cover is right for you, we can refer you to them for tailored guidance, free of charge and with no obligation.
They can explain the options in more detail and help you choose the right plan for your needs and budget.
What Is Family Income Benefit?
Family Income Benefit is a type of life insurance designed to pay out a regular monthly or annual income to your family if you die during the policy term.
Unlike a standard life insurance policy that pays out a single lump sum, FIB delivers ongoing, tax-free payments for the remaining duration of the policy — helping to replace lost income and support the household’s daily living expenses.
How Does It Work?
Here’s a simple example:
- You take out a 20-year FIB policy with £2,000 per month of cover.
- If you die in year 5, your family will receive £2,000 a month for the remaining 15 years.
- If you die in year 19, they receive £2,000 per month for just 1 year.
- If you survive the full term, no payout is made, and the policy ends.
Who Should Consider Family Income Benefit?
FIB is particularly well-suited for::
- Young families who rely on a main breadwinner’s income
- Parents wanting to secure ongoing support for childcare, school fees, and living costs.
- Households with long-term financial commitments, like mortgages or loans.
- Couples who prefer a steady income stream rather than a lump sum, to help manage money over time.
Key Features and Options
When setting up a Family Income Benefit policy, you can typically customise:
- Cover amount: The monthly or annual income your family would receive.
- Policy term: How long you want the cover to last (e.g., until your youngest child turns 21 or until your mortgage ends).
- Joint vs single cover: You can cover one life or set up joint cover where the benefit is paid on the first death.
- Indexation: Option to increase the payout annually to keep pace with inflation.
- Additional covers: You can often add critical illness cover, which pays the income if you’re diagnosed with a serious illness, not just upon death.
Advantages of Family Income Benefit
- Affordable premiums: Because the potential payout reduces over time, premiums are often lower than equivalent level-term policies.
- Regular income: Helps surviving family members manage everyday expenses without the risk of spending a lump sum too quickly.
- Tailored coverage: You can align the policy term with your family’s major milestones (like children becoming financially independent).
Important Considerations
- Decreasing total payout: The longer into the policy term you die, the lower the total amount paid.
- No lump sum: If your family needs money upfront (e.g., to pay off a mortgage), a lump-sum life insurance policy might be more appropriate.
- Term-limited: If you outlive the policy term, no benefit is paid.
It’s often worth combining FIB with other types of cover (like lump-sum life insurance or critical illness cover) to create a comprehensive protection package.
Cost Factors
Premiums depend on:
- Your age, health, and lifestyle.
- The length of the policy term.
- The monthly or annual benefit amount.
- Whether you add indexation or extra features.
Because of its decreasing liability over time, FIB is generally one of the most cost-effective life cover options.
Final Thoughts
Family Income Benefit is a smart, flexible way to ensure your loved ones continue to receive financial support if you’re no longer there to provide for them. By replacing income rather than paying a lump sum, it promotes financial stability and helps cover essential costs like bills, food, childcare, and education.
If you want to explore whether FIB is right for you — or how it can fit into your wider financial protection strategy — it’s always wise to seek independent financial advice to tailor cover to your family’s unique needs.
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