The monthly bills don’t stop when someone dies. We want to share why Family Income Benefit might be the most practical protection for you.
When most people think about life insurance, they picture a big lump sum payment. Your family gets a chunk of money, pays off the mortgage, and hopefully there’s enough left over to keep things ticking along.
Life doesn’t work in lump sums. Your family’s expenses don’t either.
The rent or mortgage payment is due on the first of the month. The gas bill arrives every quarter. The nursery fees need paying every term. Life is relentless, which is why Family Income Benefit might actually be a better fit for many families than traditional life insurance.
Key Takeaways
- Best for families with long-term financial commitments and dependents needing ongoing support
- Family Income Benefit pays a monthly income to your family if you die, rather than a one-off lump sum
- Often more affordable than traditional life insurance – policies start from £5/month
- Mirrors real life – the average UK household spends £2,700+ monthly on essentials
- Flexible cover – beneficiaries can convert to a lump sum if circumstances change
- Works alongside mortgage protection – life insurance clears the debt, FIB covers ongoing bills
- Decreasing benefit – the potential payout reduces over time, which keeps premiums lower
What is Family Income Benefit and how does it work?
Family Income Benefit (FIB) is a type of life insurance that pays out a regular monthly income instead of a one-off lump sum. If you die during the policy term (or are diagnosed with a terminal illness with less than 12 months to live), your family receives a tax-free monthly payment for the remainder of the policy term.
So instead of £300,000 landing in one go, your family gets £2,000 every month until your youngest turns 18 (or whatever timeline you choose). Same money, completely different experience.
Who Is Family Income Benefit For?
Family Income Benefit is for pretty much anyone with regular financial commitments and people who depend on their income.
But it’s particularly worth considering if you’re:
Young families with children
You’ve got 10-15 years of school uniforms, football kits, school trips, and university fees ahead of you. A monthly income ensures your partner doesn’t have to panic about how to cover these ongoing costs whilst grieving.
Homeowners with mortgages
Yes, you might have life insurance to pay off the mortgage itself. But what about the council tax, the buildings insurance, the boiler that will inevitably pack in at the worst possible moment? A monthly income keeps the household running.
Learn more about our mortgage services
Single parents
If you’re the sole earner, your children’s financial security depends entirely on your income. Family Income Benefit ensures they can maintain their standard of living if the worst happens.
Families renting long-term
If you’re not planning to buy, or you’re in London where buying feels like a distant dream, you still need to ensure your family can afford the rent every month. FIB does exactly that.
Renting but thinking about buying? See how we can help with residential mortgages
Anyone supporting elderly parents or adult children
Financial responsibility doesn’t end when kids turn 18. If you’re supporting others, a monthly income can be more practical than a lump sum that might not be managed carefully.
Why Choose Monthly Income Over a Lump Sum?
It mirrors real life
According to the Office for National Statistics, the average UK household spends £623.30 a week – that’s over £2,700 a month. The largest proportion (18%) goes on housing, fuel and power, with transport being the second biggest expense at 14%. These costs don’t arrive annually; they arrive monthly. Family Income Benefit matches this reality.
More affordable than you’d think
Because the insurer is paying out gradually rather than all at once, Family Income Benefit premiums are typically lower than equivalent lump-sum cover. Some policies start from as little as £5 per month.
Money management during grief
Receiving £250,000 when you’re grieving and possibly not thinking clearly can be overwhelming. A sudden large payment can also attract unwanted attention from friends, distant relatives, or unscrupulous financial advisers. A regular monthly income removes both these pressures – it’s less conspicuous and doesn’t require big financial decisions at the worst possible time.
Flexibility when you need it
Most Family Income Benefit policies allow your beneficiaries to convert the monthly payments into a reduced lump sum if circumstances change. They’re not locked in.
How Does It Actually Work?
When you take out Family Income Benefit, you choose:
- How much monthly income you want your family to receive (e.g. £2,000 per month)
- How long you want the policy to last (e.g. until your youngest child turns 21, or for the next 20 years)
If you die or are diagnosed with a terminal illness during that term, the monthly payments start and continue until the end date you originally chose.
Example:
- You take out a 20-year Family Income Benefit policy with £2,500 monthly cover
- You die 8 years into the policy
- Your family receives £2,500 every month for the remaining 12 years
- Total payout: £360,000 (paid as £2,500 × 144 months)
If you’d died in year 19, they’d only receive 12 months of payments. This is why FIB tends to be cheaper – the potential payout decreases over time.
Level Cover vs Inflation-Linked Cover
You have two main options:
Level cover means the monthly amount stays the same throughout the policy. It’s cheaper, but £2,000 a month will buy a lot less in 15 years than it does today.
Inflation-linked cover increases the monthly payment each year in line with the Retail Prices Index (RPI). Your premiums also increase (by RPI × 1.5), but your family’s purchasing power is protected. If you’re thinking long-term – protecting young children through to adulthood – this option usually makes sense.
What About the Costs You Haven’t Thought Of?
When we talk to clients about Family Income Benefit, they usually focus on the big obvious expenses: rent, mortgage, bills. But there are costs that only become apparent when you’re suddenly a single parent or sole breadwinner:
- Childcare – If you previously shared school drop-offs and pickups, your surviving partner might need to pay for wraparound care or an au pair
- Cleaning and household help – Running a home and working full-time is exhausting when you’re doing it alone
- Counselling and therapy – For both adults and children
- Travel to maintain family connections – Visiting grandparents might become more important, not less
- Career flexibility – Your partner might need to reduce hours or turn down promotions to be more present for the children
Family Income Benefit gives your family the breathing space to make these decisions without immediate financial pressure.
From the expert – we asked our Protection Adviser Rebecca Thomas why NM Finance specifically recommend FIB
“Many people arrange life cover to protect the mortgage but don’t consider how the family would cope with everyday living costs if the main wage earner is no longer around. Even if the mortgage is paid off, the bills don’t stop – especially with young children to support.
Family Income Benefit sits alongside mortgage life insurance perfectly: the life insurance clears the mortgage, whilst FIB provides monthly income to cover regular expenditure. And it’s not just about insuring the wage earner – even a stay-at-home parent should be covered, because childcare costs would need to be met if the surviving partner has to keep working.
We include Family Income Benefit as part of the overall protection conversation, alongside life, critical illness and income protection. That way, clients are covered for death, critical illness diagnosis, or being off work through sickness. NM Finance always considers individual needs and circumstances to provide appropriate recommendations.”
NM Finance Case Study Example
“I arranged a Family Income Benefit plan for some clients who have just had a baby. The client is a vet and is the main wage earner. Her partner is a house husband and will be looking after their daughter full-time. Their main priority is their daughter, and they were concerned that in the event of either of their deaths it would have an impact on their financial situation. If Mr died, additional childcare costs would be incurred for her as she works full-time and if she died, the main wage earners income would be lost leaving the family facing possible financial difficulty.
We arranged a Joint Family Income Benefit plan with a monthly benefit of £2000pm until their daughter reaches the age of 21. This will provide the family with financial support should either of them pass away during the policy term and provide a monthly income until their daughter has completed her full-time education (assuming that she may go University).
The policy was arranged with LV who also offer additional lifestyle benefits such as remote GP 24/7, remote physiotherapy and second medical opinion where you can get a second opinion on a diagnosis or treatment.”
Read more NM Finance Case Studies
Real-World Scenarios: When Family Income Benefit Makes Perfect Sense
The Accidental Landlord You own your home but you’re renting it out while you live elsewhere for work. You’re also renting where you live now. If something happens to you, your family has two lots of rent or mortgage to worry about. Family Income Benefit can cover the rental payments while your family decides whether to sell or move back.
Managing buy-to-let properties? See our buy-to-let mortgage services
The Sandwich Generation You’re 45, earning well, supporting teenage children and contributing to your parents’ care costs. Your partner works part-time. A lump sum might be spent on immediate needs, but a monthly income ensures ongoing commitments are met for years to come.
The Self-Employed Family Your income varies month to month, but your outgoings don’t. You know your family would need at least £3,000 a month to maintain their lifestyle. Family Income Benefit provides that certainty.
Self-employed? We specialise in mortgages for the self-employed
The Second Marriage Maybe you’ve got children from a previous relationship, maintenance to pay, plus a current family to protect. A monthly income structured the right way can cover all these ongoing obligations without putting impossible decisions on your surviving partner.
How Family Income Benefit Fits with Your Mortgage
When we’re arranging your mortgage, FIB becomes relevant for several reasons:
It complements mortgage life insurance perfectly Your mortgage life insurance pays off the mortgage itself. Family Income Benefit ensures your family can afford to actually live in the house – covering the bills, maintenance, and all those ongoing costs that don’t stop just because the mortgage is paid.
Arranging a new mortgage? We guide you through all aspects of mortgage protection
It’s particularly relevant for interest-only mortgages If you have an interest-only mortgage, you’re planning to pay off the capital from another source (usually downsizing or investments). Family Income Benefit can provide the monthly income to keep paying the interest whilst your family figures out the best exit strategy.
Considering an interest-only mortgage? Learn about your mortgage options
It supports your family through transition After a bereavement, your family might need to move, downsize, or make significant life changes. A monthly income gives them time to make these decisions thoughtfully rather than in a panic.
What If I Already Have Life Insurance?
You might have life insurance through work, or a policy you took out years ago. That’s brilliant – but it might not be enough on its own.
Ask yourself:
- Would the lump sum from my current policy actually replace my income for the number of years my family needs?
- Have I accounted for inflation since I took the policy out?
- Does it cover the full range of my family’s financial needs?
- What happens if you die in year 2 versus year 20 – does your family get the same support?
Family Income Benefit can work alongside existing cover. Think of lump-sum life insurance as paying off debts and major costs, and FIB as replacing your actual income.
How Much Does Family Income Benefit Cost?
The good news: because it’s paying out over time rather than all at once, Family Income Benefit is often significantly cheaper than equivalent lump-sum cover.
What you pay depends on:
- How much monthly income you want (£1,500? £3,000? £5,000?)
- How long you want it to last (10 years? 20 years? Until you’re 65?)
- Your age – the younger you are, the cheaper it is
- Your health and lifestyle – non-smokers pay less; certain medical conditions affect pricing
- Whether you choose level or inflation-linked cover
As a very rough guide, a healthy 35-year-old non-smoker might pay £15-30 per month for £2,000 monthly cover over 20 years. That’s less than most people spend on their monthly streaming subscriptions – and rather more important.
Single Life or Joint Life?
Single life policies cover one person. If you die, the policy pays out. These are usually appropriate if one person is the main earner, or if you want to protect specific income.
Joint life policies cover two people but only pay out once – when the first person dies. They’re typically cheaper than two single policies, but the survivor is left uninsured.
For most couples, we’d recommend two single life policies. Yes, it costs more, but it means both partners remain protected. You never know whose income will prove most crucial to protect.
Important Things to Know
No cash value If you stop paying premiums, your policy ends and you get nothing back. This is pure protection, not an investment.
The payout reduces over time Because it only pays from the date of claim until the original end date, the potential payout decreases as time goes on. This is why it’s cheaper than level term insurance, but it’s worth understanding.
It’s not regulated as tightly as some products Family Income Benefit is a life insurance product, so it’s FCA regulated. However, it doesn’t have the same consumer protections as savings products.
Tax treatment Payments are usually tax-free, but if the policy is written in trust (which we’d always recommend), make sure it’s set up correctly. We can help with this.
Should You Choose Family Income Benefit?
Family Income Benefit isn’t right for everyone, but it’s right for a lot more people than currently have it.
Family Income Benefit shines when you’ve got kids who need supporting for years, when your family depends on your monthly income, or when you want something affordable that actually matches real-life expenses.
It’s less useful for clearing big one-off debts or very short-term obligations.
The best approach? Often it’s a combination of lump-sum life insurance for big debts, and Family Income Benefit to replace income. That way your family has both immediate capital and ongoing security.
What Happens Next?
If you’re arranging a mortgage with NM Finance, we’ll always discuss protection as part of our service. It’s not an upsell – it’s making sure you’re properly looked after.
Not started your mortgage journey yet? See how we can help or book a call back
We’ll talk through:
- What financial commitments you have
- Who depends on your income
- What would happen to your family if you weren’t around
- Whether Family Income Benefit, traditional life insurance, or a combination makes most sense for you
Our protection advice is included as part of our mortgage service. We’re directly authorised by the FCA, all our advisers are CeMAP qualified, and we have access to the whole market – so we’re not tied to one or two providers.
Let’s make sure your family’s financial future is protected in the way that actually works for your life.
Related Reading
Want to learn more about protecting your family and mortgage? Here are some helpful resources:
Mortgage Protection With A Family History Of Cancer – A real NM Finance case study showing how we secured income protection cover with no cancer exclusions for a self-employed client
Income Protection With Family History Of Cancer: What You Need To Know – Understanding how family medical history affects protection applications
Your Complete Guide to Mortgage Protection Insurance – Explore all your protection options including life insurance, critical illness cover, and income protection
Ready to Talk About Family Income Benefit?
Give us a call on 0808 281 8824 or book a callback here.
We’ll have a straightforward conversation about your situation and help you understand exactly what protection makes sense for your family.
Family Income Benefit is a type of decreasing term life insurance. The information in this article is for general guidance only and should not be considered financial advice. Always speak to a qualified adviser about your specific circumstances. NM Finance is directly authorised by the Financial Conduct Authority.
