9 min Read
11 Jun 2019

Written by Andy

What is family income benefit life insurance and should I get it?

What is family income benefit life insurance?What is family income benefit insurance?

Family income benefit (often referred to as FIB) is a cost-effective form of life insurance that pays out a tax-free income, rather than traditional life insurance policies (often referred to as term life insurance) that pay out a one-off lump sum. Most people take out a family income benefit life insurance policy to replace the loss of income in the event of death and it pays a regular monthly income until the end of the policy term.

When comparing family income benefit quotes, you need to decide how much you wish to cover and over how long. As the proceeds of a family income benefit are paid out tax-free, most people opt to cover slightly less than their full salary; this helps to reduce the cost of the insurance.

Why is family income benefit life insurance cheaper than term life insurance?

A family income benefit policy will pay out a set monthly income until the end of the policy term. The longer a policyholder survives, the lower the total potential payout. For example, the family of someone taking out a family income benefit policy for £1,000 per month and over a 20 year policy term has the potential to receive a total of £240,000 if they were to die straight away (£1,000 x 12 x 20). However, if they died 10 years into the policy term, the payout will have effectively halved, as it will only pay out £120,000 (£1,000 x 12 x 10)

A term Life Insurance policy however, will always pay a guaranteed lump sum and that sum will remain the same for the full term of the policy. If, like in the example above, a policyholder dies after 10 years, it would still pay out the full £240,000.

As the potential payout on a family income benefit policy reduces over time, the quotes for a family income benefit plan are cheaper than term life insurance from outset.

How much does family income benefit cost?

As we have explained above, a family income benefit life insurance policy is a cost-effective form of life insurance (as the potential payout reduces over time.) Below we have compared the cost of term life insurance and family income benefit quotes. We look at the cost of £250,000 over 25 years and have provided example quotes for a 25, 30, 35, 40, 45 and 50 year old.

Term life insurance v family income benefit quote comparison for a non-smoker

Age Term Life Insurance Payout Family Income Benefit Payout
25 £6.76 £250,000 Guaranteed £6.26
Payout reduces each year
30 £8.54 £250,000 Guaranteed £6.45
Payout reduces each year
35 £11.38 £250,000 Guaranteed £7.92
Payout reduces each year
40 £16.40 £250,000 Guaranteed £10.42
Payout reduces each year
45 £27.79 £250,000 Guaranteed £14.81
Payout reduces each year
45 £42.52 £250,000 Guaranteed £23.37
Payout reduces each year
50 £74.04 £250,000 Guaranteed £38.76
Payout reduces each year

 

Term life insurance v family income benefit quote comparison for a smoker

 

Age Term Life Insurance Payout Family Income Benefit Payout
25 £10.87 £250,000 Guaranteed £7.82
Payout reduces each year
30 £14.86 £250,000 Guaranteed £9.50
Payout reduces each year
35 £21.97 £250,000 Guaranteed £12.95
Payout reduces each year
40 £34.10 £250,000 Guaranteed £19.93
Payout reduces each year
45 £63.04 £250,000 Guaranteed £32.31
Payout reduces each year
45 £104.12 £250,000 Guaranteed £54.20
Payout reduces each year
50 £174.67 £250,000 Guaranteed £92.44
Payout reduces each year

 

Should I get family income benefit insurance?

The best way to understand whether you should take out a family income benefit policy is to speak to a specialist independent insurance broker, as they will be able to assess your individual circumstances and make a recommendation, as well as providing independent quotes. We explain more in the section 'How to get the cheapest and best family income benefit quotes' and explain how you can get £50 cashback.

A family income benefit policy is a good policy to consider if you want to keep costs low and ensure that any beneficiaries can continue with the same lifestyle that they have become accustomed to. While term life insurance may provide more coverage over time, it comes at a cost.

The hope is that you will never need to claim on a life insurance policy and in fact, if you survive the policy term, neither the term life insurance or family income benefit policy will pay out, irrespective of how much you are insured for. Another thing to consider is whether you actually need a guaranteed lump sum payout. Most people tend to need less life insurance as they get older, as mortgages reduce over time and children become less financially dependent as they grow older.

Which insurance companies provide the best family income benefit insurance quotes?

Most life insurance companies will provide quotes for family income benefit insurance. A popular way of taking family income benefit insurance is to include it as an 'add on' plan or as part of a 'menu' policy. As family income benefit is so cost-effective, it can be a very inexpensive 'add on' when taking other types of life insurance or critical illness cover or when covering your mortgage.

Popular insurance companies that provide this type of cover are Legal & General, Royal London, Aviva, LV= and Aegon. It is however very difficult to find which company provides the cheapest family income benefit quotes, as online life insurance calculators are unable to provide quotes for multiple benefits. We explain in the section below how to get the cheapest family income benefit quotes, including how to get £50 cashback.

How to get the cheapest and best family income benefit Quotes

The best way to guarantee the best and cheapest family income benefit life quotes is to speak to an independent specialist. Online life insurance calculators will only ever be able to give you a basic 'guideline' price, whereas an insurance specialist can tailor a quote to your individual circumstances.

An independent specialist will be able to:

  • Help complete your application forms as well as chase up the application with the insurance company
  • Give independent advice on the best type of policy and ensure that you are purchasing the correct amount of cover
  • Search the whole of the market (online life insurance comparison sites do not always check the whole of the market, meaning you could be missing out on the cheapest quotes)
  • Help you to complete a trust form to ensure the proceeds are paid to the right people and without the need to pay inheritance tax or go through probate
  • Understand your medical history and put you in touch with the insurance company that will provide the best quotes post-underwriting. For example, the cheapest insurer may increase your premiums based on your answers to the health questions, whereas another may not. The cheapest pre-underwriting quote, therefore, is not always the best

We have personally vetted the services of a specialist insurance broker that will be able to do all of the above for you. The firm employs strong ethics and will only ever offer a policy if it is the best policy to suit your needs; something we witnessed for ourselves when we visited their offices recently. To speak to an adviser, with no obligation to take things further, just fill in the form via the above link. If you are happy with their service and end up taking a policy, you will qualify for £50 cashback.

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