Calculate how much Family Income Benefit cover your family needs — and compare it to an equivalent lump sum life insurance policy.
Family Income Benefit Calculator
Enter your family's monthly income requirement and policy details to see how FIB compares to lump sum life cover.
Monthly income secured by FIB
Required lump sum equivalent (PV of annuity)
Monthly income from your existing lump sum
FIB total payout (death on day 1)
FIB payout if death at year 5
FIB payout if death at year 10
FIB payout if death at year 15
Income gap vs lump sum coverage
Results are illustrative. Actual FIB premiums vary by age, health, insurer and term. Always get personalised advice from a qualified financial adviser.
What Is Family Income Benefit Insurance?
Family Income Benefit (FIB) is a form of life insurance that pays a regular monthly or annual income to your dependants if you die during the policy term. Unlike standard term life insurance which pays a single lump sum, FIB continues paying an income for the remaining years of the policy — providing your family with a reliable income stream that replaces your earnings.
FIB is particularly well-suited to families with young children, where the financial need is for ongoing income rather than a capital sum. A parent who earns £3,000 per month, for example, may want their family to receive that £3,000 each month for the next 20 years if they die — not a lump sum that must be carefully invested and gradually drawn down.
The key advantage of FIB is cost. Because the insurer's maximum total payout reduces each year as the policy progresses (fewer years remain, so fewer payments are due), premiums are typically lower than for an equivalent lump sum level term policy. If you die in year 18 of a 20-year policy, the insurer only pays 2 years of income — not 20. This declining liability is reflected in lower monthly premiums.
How FIB Compares to Lump Sum Life Cover
With standard term life insurance, the sum assured remains constant throughout the policy term. If the sum is £500,000, that is what your family receives whether you die in year 1 or year 19. The lump sum must then be managed and invested to generate income, which requires financial knowledge and discipline. If invested at 4% per year, £500,000 generates around £20,000 per year, or roughly £1,667 per month.
With FIB, your family simply receives the agreed monthly income directly, with no investment decisions required. This removes the risk of poor investment choices, market downturns at the wrong time, or premature spending of capital. For many families, the simplicity and certainty of a monthly income is more practical than managing a large lump sum during bereavement.
The present value calculation on this page shows the lump sum that would be needed — at your chosen investment return — to generate the same monthly income over the same term. This gives you a direct comparison of the two approaches.
Inflation-Linked FIB
A fixed FIB policy pays the same monthly income throughout the claim period. After 10 or 15 years, inflation will have eroded the real value of that income significantly. At 3% annual inflation, a £3,000 monthly income is worth only about £2,225 in real terms after 10 years and just £1,650 after 20 years.
Inflation-linked FIB increases the monthly payment each year during the claim, typically at a fixed rate of 3% per year (often linked to RPI). This preserves the purchasing power of the income over time. Premiums for inflation-linked policies are higher than for fixed policies, but for long-term family protection the additional cost is usually worthwhile.
Writing FIB in Trust
Like all life insurance policies, FIB should normally be written in trust. A policy in trust pays benefits directly to named beneficiaries without forming part of the deceased's estate. This means payments can be made quickly without waiting for probate, and the policy proceeds are outside the estate for inheritance tax purposes. Most insurers offer free trust documentation — it costs nothing to set up and can save significant time and tax.
Frequently Asked Questions
What is Family Income Benefit insurance? +
Family Income Benefit (FIB) is a type of life insurance that pays a regular monthly or annual income to your dependants if you die during the policy term, rather than a lump sum. It covers the period remaining on the policy from the date of death to the end of the term.
How is FIB different from standard term life insurance? +
Standard term life insurance pays a fixed lump sum on death. FIB pays an ongoing income for the remaining policy term. FIB premiums are typically lower than equivalent lump sum cover because the insurer's total payout reduces each year as fewer years remain on the policy.
What does inflation-linked FIB mean? +
With inflation-linked FIB, the monthly income paid to your family increases each year during the claim, usually at a fixed rate such as 3% per year linked to RPI. This protects the real value of the income against rising costs. Premiums for inflation-linked policies are higher than fixed-income policies.
How do I calculate how much FIB cover I need? +
Start with your family's essential monthly expenses including housing costs, bills, food, childcare and transport. Deduct any income they would still receive such as a partner's salary or state benefits. The gap is your monthly FIB requirement. The term should cover at least until your youngest child is financially independent.
What is the present value of a FIB annuity? +
The present value is: monthly income × 12 × (1 − (1 + r)^−n) / r, where r is the annual return and n is the years remaining. This gives the equivalent lump sum needed at that investment return to generate the same income over the same term.
Is FIB payout taxable? +
FIB payouts are generally free of income tax and capital gains tax. If the policy is written in trust, payments bypass probate and are paid directly to beneficiaries without forming part of the estate for inheritance tax purposes. Writing in trust is strongly recommended.
Can FIB pay a lump sum instead of income? +
Some insurers offer a commutation option that converts the remaining income stream into a lump sum on death. The lump sum is calculated as the present value of remaining payments at a specified discount rate. Check policy wording carefully as not all policies offer this.
Does FIB cover a joint policy? +
Yes, FIB is available on single or joint life basis. A joint life first death policy pays the income on the first death, covering the surviving partner. Separate individual policies give more flexibility and can be more cost-effective depending on age and health.
How long should my FIB term be? +
The term should cover your years of financial dependency — typically until the youngest child reaches 18 or 21, until a mortgage is repaid, or until the main breadwinner reaches state pension age. Longer terms mean higher total potential payouts but typically lower monthly premiums due to the declining payout structure.
What happens if I die in the last year of the policy? +
If you die in the final year of the policy, your family only receives income for the remaining months until the policy end date. This is why FIB becomes less valuable as the term progresses — and why premiums are lower than level term assurance for an equivalent monthly amount.
Can I get critical illness cover added to FIB? +
Yes, many insurers allow critical illness cover to be added to FIB so that the monthly income is paid if you are diagnosed with a specified serious illness, not only on death. This combined approach can provide comprehensive financial protection for your family.
Is FIB better than lump sum life insurance for families with young children? +
FIB can be better suited to families with young children because it provides a steady income replacing the main earner's salary rather than a lump sum that must be managed. Many financial advisers recommend FIB alongside a smaller lump sum policy to cover immediate costs such as funeral expenses and debt clearance.
Author: Mustafa Bilgic (MB) Published: 1 January 2025 Last updated: 10 March 2026