Family income benefit: the monthly payment and the policy end date

Family income benefit is a form of life insurance designed around regular payments after a qualifying claim. It can help address a household's ongoing spending needs, but the amount payable depends on both the monthly benefit and how much of the policy term remains.

A quotation showing “£1,500 a month for a 20-year policy” should not be read as a promise of 20 years of payments whenever a claim occurs. Understanding the end date is central to understanding the cover.

Distinguish the payment pattern from a lump sum

Ordinary lump-sum term assurance pays a specified capital amount following a valid claim under its terms. Family income benefit instead normally pays a monthly amount for the remaining term after the insured event.

Aviva's Family Income Benefit key features illustrate this structure. The policy can cover death and a defined terminal illness; eligibility, exclusions and payment terms must be checked in the particular contract.

Regular payments may fit a recurring budget, while a lump sum may fit an immediate liability. Neither payment pattern is automatically better. Begin by identifying the spending or debt that needs funding.

Calculate the remaining term in an example

Assume level cover pays £1,500 monthly and the policy has a fixed end date 20 years after commencement. Ignore any part-month adjustments and assume the claim meets all conditions.

If the insured event occurs with 15 complete years remaining, the illustrative nominal total is £1,500 multiplied by 180 months: £270,000. With five complete years remaining, it is £1,500 multiplied by 60 months: £90,000.

The monthly payment is unchanged in those examples, but the remaining aggregate benefit is much lower later in the policy. These totals are not an upfront cash value and do not account for inflation or the timing value of money.

Match the end date to the actual dependency

A policy intended to support children needs a considered end date. School leaving, further education and the likely duration of financial dependence may occur at different times for different children.

For a household with children aged four and nine, cover ending in 14 years would end when the younger child is 18 and the older is 23. Whether that fits depends on the family's plans and other resources, rather than a standard age being right for everyone.

If a new child arrives or the intended period of support changes, review the cover. Do not assume an existing policy automatically extends its end date because the household's needs have changed.

Build the monthly need from a realistic survivor budget

List the costs that would remain and the income that would continue. Housing, childcare, transport and support previously provided without payment may change substantially after a death.

Suppose essential spending in a hypothetical survivor budget is £2,800 a month and dependable remaining income is £1,600. The recurring shortfall is £1,200 before allowing for additional costs or uncertainty.

Do not simply replace the deceased person's gross salary. Some spending may stop, other spending may rise and the survivor's working pattern may change. Establish the gap using money actually available to the household.

Keep immediate capital needs visible

Monthly benefit is not the same as an immediate payment large enough to clear a mortgage, fund a move or meet other substantial costs. A plan may need to address those separately.

Ask whether any option to commute future payments to a lump sum exists and how it would be valued. Do not add up all future payments and assume that exact amount can be requested immediately.

If several policies are proposed, map each one to a need. This helps avoid counting the same mortgage repayment or childcare cost twice when assessing the overall package.

Check increases, ownership and claim administration

Level monthly benefit can lose purchasing power over time. Increasing cover may be available, but the increase rules and premium changes are policy-specific. Compare affordability throughout the term, not just the first payment.

Establish who owns the policy, who is insured and who receives the benefit. Trust arrangements, if appropriate, need to be properly explained and documented. Ask how the recipient would notify a claim and locate the policy information.

Related reading covers how protection advisers are paid, income protection advice and preparing for an advice meeting. Family income benefit concerns a death or other specified insured event; it should not be confused with income protection paying because illness prevents you from working.