What is it?

It is a term life insurance policy that pays out an income, rather than a lump sum.

These policies are not very common, so you may have to go through an independent financial adviser or broker to find a policy that offers an income payout.

How does it work?

You choose an annual benefit and a duration for the policy, known as the term.

If you die during the term, your insurer will pay the income you choose to your loved ones for the remaining duration of the policy's term.

For example, if you took out a 30 year policy and died after 28 years, your insurer would only pay an income for the remaining 2 years.

This differs to a lump sum payment on a life insurance policy, where you choose a larger amount as a one off payout.

What does it cost?

Your monthly premiums will depend on:

  1. 1.

    Your age: The older you are, the more expensive it will be.

  2. 2.

    The annual income you want as a payout: The higher the income you choose, the more you will pay in premiums each month.

  3. 3.

    If you have ever smoked or had health issues: Anything that affects your health will decrease your life expectancy, and increase how much you pay for life insurance.

This type of policy is usually cheaper than level term life insurance because the amount an insurer pays out reduces throughout the policy's term.

Is it worth it?

If you only want to replace your income when you die, a family income benefit policy could meet your needs. But it will only pay out until the end of the policy's term.

If you want a policy that pays out as much as possible, a family income benefit policy is a risky option.

This is because the insurer only pays out for the remaining term of the policy, so the amount your loved ones get will depend on when you die.

However, if you had term life insurance which offered a lump sum payout, you would get it all if you die during the policy's term.