Life Insurance or Family Income Benefit — Which Works Best For Your Family?

Are you the sole breadwinner in your family? You’ve probably considered life insurance, Family Income Benefit (FIB) or both. While they have different names, they both essentially perform the same function.

Your life insurance policy pays out a tax-free lump-sum if you pass away, which helps your family to cover the mortgage or rent, any school fees and everyday living costs, like groceries and fuel. You might have a level term policy, which provides a fixed pay-out if you die during the policy term, or a decreasing term policy, where the amount the provider pays out decreases with time. The latter often aligns with the repayment of a large loan, for example a mortgage.

FIB supports your family in a similar way, paying out in monthly instalments rather that at once. This can be helpful during stressful times, as managing one large payment can feel rather intimidating. Opting for FIB means your family will receive the assured amount in a routine that matches the arrival of your income.

It’s entirely up to you when you decide to arrange life insurance or FIB but it’s important to consider that the younger you are and the healthier your lifestyle, the lower your monthly premiums will be. You can also decide how long your FIB policy will run for after your death. Choosing a smaller cover amount over a smaller period will bring down monthly premiums.

Now, why choose one over the other?

If your main concern is affordability, FIB can function as a strategic alternative to life insurance. Level term policies are expensive as unlike decreasing term policies, the assured amount doesn’t decrease over time. While cheaper, decreasing term policies provide little stability…

Let’s say you want to support your five-year-old child until the age of 25 regardless of your circumstances. You might set up a FIB policy with a 20-year term at £60,000 a year and opt for monthly instalments of £5,000.

If you pass away during the policy term, your child will receive £60,000 for the remainder of years left on the policy in monthly instalments.

Pass away in year one? Your family will receive a total of £1,200,000.

Year 10? Your family will receive a total of £600,000.

Year 19? Your family will only receive £60,000.

If you reach the end of your policy term, then your child won’t receive a pay-out. However, if you think about it, this is actually the best scenario. Your child reaches the age of 25, and you’re there to celebrate with them.

See how it works? This means lower risk and, therefore, lower monthly premiums.

Depending on your circumstances, you might also choose FIB as it better matches real, everyday needs. Your mortgage will reduce over time, your children may become financially independent and, when they leave, household expenses will drop. This means you can tailor monthly instalments and cover periods to your family circumstances.

If you’re struggling to decide, the simplest way to think about it is this — life insurance releases a big, fixed pay-out no matter what, but FIB provides income that runs out at a fixed date.

There’s no ‘one-size-fits-all’ when it comes to cover, so it’s important that your cover matches your circumstances.

If you want to explore your options and find the most suitable type of insurance policy for you, get in touch and we’ll book you in for a no-obligation chat.

 

Approved by The Openwork Partnership on 30/04/2026.