Family Income Benefit Insurance UK

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What is Family Income Benefit Insurance in the UK?

  • Provides a tax-free monthly income
  • Helps long-term family budgeting
  • Low-cost premiums
  • Could pay out up to £5000 a month (this can be more or less depending on the provider)
  • Term length up to 40 years

A different kind of life insurance in the UK is family income benefit insurance, sometimes referred to as FIB or family income protection.


Instead of receiving a lump sum payment upon your death, as is the case with typical life insurance, your loved ones will instead get recurring monthly income payments.


The family income benefit insurance payments in the UK will start as soon as your claim is approved and continue until your policy expires.

Tax-free payments might assist your loved ones to maintain their standard of living by replacing your lost income.


Family income benefit in the UK is well suited to new parents, or those with young families, who want an affordable way to provide for their loved ones should the worst happen.

How Does Family Income Benefit Insurance Work in the UK?

Like other types of life insurance, family income benefit insurance in the UK lets you specify the amount and duration of coverage that will be provided to your loved ones.


The distinction is that your loved ones will get regular income payments rather than a big sum.


When you die, your beneficiaries can file a claim, and payments will start for the remaining period of your policy’s term. When you pass away, these payments may enable your loved ones to maintain their standard of living without having to make significant adjustments.


For example, if you take out a 30-year policy and then die five years into it, your family will receive payments for the next 25 years. But if you die 28 years into the term, the payments would be limited to the last two years of the policy.


Premiums on these policies are either guaranteed, meaning they’ll stay fixed for the length of the policy, or reviewable, which means they will be reviewed by the insurer at set intervals – typically every five or ten years – and adjusted, usually upward.

How Much Family Income Benefit Insurance Do You Need in the UK?

Your unique situation and the financial obligations you want to take care of for your loved ones will determine how much family income benefit coverage you require.


Young families that want to safeguard ongoing family living expenses might consider a family income benefit policy. After your passing, it might be useful in restoring lost income and enabling your loved ones to maintain their existing standard of living.


The following factors should be considered when determining how much family income benefit coverage in the UK you require:


What financial commitments you have – It’s a good idea to consider both your existing financial obligations and any expenses that are expected to arise in the future.


How long should your cover last? To allow loved ones to continue paying payments and staying in the family home, it is good for your policy to reflect any mortgages or long-term rental agreements you may have. Additionally, you might want to time your family income benefit policy to coincide with your kids’ financial independence.

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Commonly, payments from family income benefit insurance in the UK are used to help cover:


  • Mortgage payments – Average monthly mortgage payments in the UK are at around £753 per month[1]
  • Rent – Average rent in the UK, as of 2022, stands at £606 per month[2]
  • Household bills – From October 2022, British Gas suggest it could cost between £295.74 – £417.76 a month to heat medium to large sized homes[3]
  • Family living costs – On average UK families spend £588 per week (that’s £2,548 per month)[4]
  • Debt/loan payments – the average UK household spends £373 each month on loan/debt payments[5]
  • Childcare – It now costs £137.69 per week for part-time childcare, with full-time childcare costing £263.81 per week[6]
  • Transportation – The average UK household spends just over £1,160 on petrol/diesel each year, with £1,128 being spent on public transport each year[4]
  • Higher education costs – A 2021 study found that the average student receives around £120.56 per week from their parents[7]


By adding together all your financial commitments, you should find the sum of money your loved ones are likely to need to cover all essential costs.

Why Secure Family Income Benefit Insurance Through Life Expert in the UK?

  • Get free quotes from our panel of insurers.
  • FCA-regulated broker service.
  • Support and guidance throughout the entire application process.
  • A dedicated team member can answer any questions you have.
  • Affordable monthly premiums.
  • Fee-free, personalised quotes based on your personal circumstances.
  • Compare multiple policy types (including family income benefit, life insurance & income protection) to get the right policy to meet your needs.

How are Family Income Benefit Premiums Calculated in the UK?

Family income benefit premiums in the UK are calculated in the same manner as other forms of life insurance in the UK; based on your likelihood of making a claim.


During the application, you’ll be required to provide key information, which will allow insurers to assess your level of risk.


This information includes details about yourself as well as details about your policy, including:


  • Age
  • Smoking status
  • Medical history
  • Lifestyle
  • Monthly income you’d like paid out
  • Policy term

When taking out family income benefit insurance in the UK, you have the option of guaranteed premiums or reviewable premiums.


Guaranteed premiums will remain the same throughout the lifetime of the policy, meaning the price you pay doesn’t change.


Reviewable premiums can often be cheaper initially, but your insurer has the right to increase them throughout the term of your policy (this can be down to a range of factors such as your age or change in risk).

Is Family Income Benefit Insurance Taxable in the UK?

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No, family income benefit payments in the UK are tax-free.


Anything that brings an estate (your funds, property, and things) above the £325,000 threshold is subject to a 40% inheritance tax. A lump sum payout from a standard life insurance policy might easily push an estate over this threshold and into the inheritance tax bracket.


Family income benefit insurance policies in the UK are not subject to inheritance tax since they are paid out in monthly installments rather than a single lump sum that is added to your estate.


Family income benefit payments in the UK also won’t be subject to income tax.

Alternatives to Family Income Benefit Insurance in the UK

The amount you receive from a family income benefit policy in the UK lowers over time, just like a decreasing term life insurance policy. If you want to make sure you have the best possible coverage, this is not the policy you should pick.


These policies have an expiration date much like other term life insurance products in the UK. You might wish to consider a whole of life insurance, often known as life assurance if you want to guarantee that your family receives a payout regardless of when you pass away, perhaps to pay for funeral costs or if you have ongoing care commitments. No matter when you pass away—whether it’s next year after just a few months of premium payments or decades of on-time payments—these policies will provide a predetermined payment.


If paying off a sizable debt, such as a mortgage, would be your surviving dependents’ main expense, then a family income benefit insurance policy in the UK might not be appropriate. While family income benefit might enable your family to continue paying the mortgage, it would be more cost-effective in the long term for them to receive a lump sum to pay off any remaining loan balance rather than having to pay interest on it for years.


In that situation, you could also choose to get a mortgage-linked decreasing-term life insurance policy. In fact, as a condition of the loan, some lenders will demand that you acquire one on joint mortgages.

Compare Family Income Benefit Quotes in the UK

Family income benefit insurance in the UK can be an extremely cost-effective way of protecting your loved ones. Get free family income benefit quotes in the UK to allow you to find the right family income benefit policy to meet your specific needs at a budget that suits you.


Life Expert can help you to do this and provide you with free quotes from our panel of insurers. A friendly member of the team can also untangle any jargon you don’t understand and answer any questions you may have regarding family income benefit insurance in the UK.