Family income benefit: life insurance paid as a monthly income

You choose an income, set as a monthly or yearly amount, and how many years the policy runs. If you die during that time, the insurer pays the income to your dependants until the policy's end date.

In Zurich's example, a policyholder passes away with 8 years and 2 months of the policy left. His family gets £1,000 a month for the rest of the term, £98,000 in total.

1. You set the income and the term You pick a regular amount and an end date, such as when your youngest child is likely to be independent.
2. You pay the premiums You pay for the policy while it runs. Legal & General's and Royal London's policies, for example, have no cash-in value.
3. A claim is made If you die during the term, your family claims, or your trustees do if the policy is written in trust.
4. The regular income runs until the end date The insurer pays the agreed monthly amount until the policy ends. At Aviva, payments start from the date it accepts the claim.

Many policies include terminal illness cover, which lets you claim early if your life expectancy is under 12 months. LV=, Legal & General, Royal London and Zurich all pay out the regular income on a qualifying terminal illness diagnosis during the term.

If you're a single parent, the payments could go to the loved ones caring for your children, for their living costs. Our family life insurance guide covers the wider questions for parents.

Family income benefit pays out in regular instalments. Lump-sum term life insurance pays one sum, and with level term cover that sum stays the same throughout the policy.

With decreasing term cover, the lump sum goes down each year. It's designed for a repayment mortgage, where the loan also goes down.

You can also have both. At LV=, Family Income Benefit and Life Protection can go in one Flexible Protection Plan, with a small discount when the plan has more than one cover.

LV= also includes a Pay My Mortgage facility for your beneficiaries (the people who receive the payout). Depending on their circumstances when they claim, they can have some or all of the monthly income paid straight to their mortgage lender.

• Term life insurance: level cover that pays a fixed lump sum
• Decreasing term life insurance: cover that falls with a repayment mortgage
• Level term or decreasing?: how to choose between the two

The main drawback is that the total payout shrinks as the policy nears its end date. A claim late in the term leaves only a few monthly payments.

Family income benefit pays your family if you die, while income protection pays you if you can't work. Income protection replaces part of your earnings during illness or an accident, and stops if you pass away.

• Income protection: a monthly income while you can't work
• Critical illness cover: a lump sum if you are diagnosed with a covered illness

The amount of cover you need depends on your mortgage or rent, debts, income and how many dependants you have. Our family income benefit calculator adds up what your family would get in total and shows how that total falls each year.

1. Add up the monthly family costs Work out what your household would still pay each month for housing, day-to-day living costs and childcare. In England, 25 hours a week of nursery care for a child under two averages £188.75 a week. That's for families who can't get the working-parent funded hours.
2. Subtract money that would carry on Take off your partner's earnings and any death in service benefit from your job (cover linked to your salary). A surviving partner who gets Child Benefit for a child living with them may get the higher rate of Bereavement Support Payment. In 2026/27 that's £3,500 plus 18 monthly payments of £350, if they claim within 3 months of the death.
3. Match the term to how long support is needed Insurers offer terms from 5 years up to 40, 50 or 72 years, depending on the insurer and your age. If you get child maintenance, you could have a policy on your ex-partner that pays you an income until those payments were due to end.
4. Decide on a level or increasing income A level income pays the same amount each month, so inflation reduces its value over time. Increasing cover rises each year, for example by 3%, 5% or in line with the Retail Prices Index (RPI, a measure of inflation) at Zurich.

You can also apply to change your cover later if your needs change. Legal & General lets you apply to increase your cover at any time, though it usually assesses changes then and may set up a new policy.

• Life insurance for mums: valuing childcare and unpaid care
• Life insurance for dads
• Family life insurance

Your monthly premium depends on your age, health, lifestyle, smoking status, family medical history, occupation and policy term. At LV=, the minimum premium for Family Income Benefit is £5 a month, and premiums are guaranteed for the whole term.

If covering everything costs more than you can afford, decide what matters most or choose a lower level of cover.

An increasing income changes the premium in different ways at different insurers:

• At Aviva, premiums on increasing family income cover stay the same throughout the policy, so including increasing cover costs more.
• At Royal London, level payment premiums don't change if paid on time, while increasing cover premiums rise each year by the rate in your cover summary multiplied by 1.2.
• At Forester Life, the annual income benefit rises automatically each year by RPI (capped at 10%), with no corresponding rise in your premium.

Premiums vary between insurers, so it's worth shopping around and comparing quotes for the same monthly income and term. A broker will call to go through quotes with you.

Not as income. HMRC's tax manual treats family income cover as a series of capital sums paid on death, so the payments aren't treated as income.

Legal & General says its payouts should be free from UK Income Tax and Capital Gains Tax, though the Government may change this. LV= also calls its payout a tax-free monthly income.

Inheritance Tax is separate. Without a trust, the payout normally goes into your estate (your property, money and possessions), where Inheritance Tax may apply. There's normally none to pay if your estate is below the £325,000 threshold, or if you leave everything above it to your spouse, civil partner or a charity.

Written in a suitable trust, the payout shouldn't form part of your estate. It also goes straight to the people you chose without waiting for probate (the legal right to deal with an estate).

Legal & General says a policy in trust is unlikely to raise significant tax considerations in most cases if the money is paid out immediately. Because an income plan pays monthly over the years you chose, the potential for tax within the trust is higher. If money stays in trust for longer, trust tax charges could arise and professional advice may be needed.

• Life insurance in trust
• Is life insurance taxable?
• Life insurance beneficiary rules

Aviva, Forester Life, Guardian, Legal & General, LV=, Royal London, Scottish Widows and Zurich all offer family income benefit. Depending on the insurer, it's called Family Income Benefit, Family Income Cover, a Family and Personal Income Plan, or a monthly income option on life cover.

Aviva, Guardian, Legal & General, Royal London and Zurich sell theirs through financial advisers. Scottish Widows Protect is also sold by phone, video or in branch through Bank of Scotland, Halifax and Lloyds Bank. Vitality lists Family Income Cover in its claims guidance, with no time limit for a death claim.

1. Set the income and the term Base the monthly amount on your debts, mortgage or rent, income and dependants. End the term when your family would no longer need that regular support.
2. Choose level or increasing payments A level income loses value to inflation over time. If you choose increasing cover, check whether the insurer charges more throughout or raises the premium each year.
3. Check how a claim would pay Check whether the policy pays out on a terminal illness diagnosis, and whether your family could swap the monthly income for a smaller lump sum.
4. Think about a trust Written under a suitable trust, the payout shouldn't form part of your estate for Inheritance Tax. Because the income runs over years, check whether trust tax or registration rules could apply.
5. Compare like with like Premiums and policy limits vary, so compare quotes for the same monthly income and term, and check the current policy summary before applying.