Family income benefit is a type of life insurance that pays out as a regular monthly or annual income to your dependants for the remainder of the policy term if you die during it, instead of paying a single lump sum. The payments stop at the end of the term, so a policy taken for twenty years that pays a claim in year fifteen would provide income for the remaining five years.
It is often arranged alongside a mortgage to cover household running costs rather than the mortgage balance itself, which is typically protected separately by decreasing term assurance. Because the total amount payable reduces as the term progresses, family income benefit is usually cheaper than level term cover for the same monthly figure. Lenders do not require it as a condition of borrowing, but many borrowers review it when arranging a mortgage because dependants’ living costs continue whether or not the mortgage is repaid.