How Much Family Income Benefit Do I Need in the UK

Losing a loved one is a profoundly difficult experience, one that no amount of financial planning can ever truly prepare you for. However, what you can prepare for is the financial aftermath. The loss of a key earner can destabilise a family's finances overnight, turning a period of grief into one of intense financial stress.

This is where Family Income Benefit (FIB) comes in. It’s a type of life insurance designed not to pay out a single, large lump sum, but to provide a regular, tax-free monthly or annual income to your family if you were to pass away during the policy term. Think of it as a replacement for your monthly salary, ensuring the bills continue to be paid, the children’s needs are met, and your family can maintain their standard of living without financial hardship.

But the crucial question remains: how much cover is enough? A figure plucked from thin air is as good as no plan at all. This definitive guide will walk you through, step-by-step, how to calculate the precise amount of Family Income Benefit your household needs, and for how long you’ll need it. We’ll break down your expenses, consider other income sources, and ensure you arrive at a figure that provides true peace of mind.

Work out the right monthly benefit and term based on your household costs

Calculating your Family Income Benefit needs isn't a dark art; it's a logical process of assessing your family's financial reality. The goal is simple: to identify the financial gap your death would create and to plug it with the policy's income.

We can break this down into four clear steps:

1. Add up your essential monthly household outgoings.
2. Subtract any income your family would still receive.
3. The result is your monthly income 'shortfall' – the amount of cover you need.
4. Determine the policy 'term' – how long the payments should last.

Let's explore each of these steps in detail.

Step 1: Tally Your Total Monthly Household Expenses

The first task is to create a comprehensive budget of your family’s monthly spending. Be thorough and realistic. It’s better to slightly overestimate than to leave your family short. Grab a pen and paper or a spreadsheet and work through the following categories.

Common Household Expenses Checklist:

According to the Office for National Statistics (ONS) data on household expenditure, the average UK household spends around £2,700 per month on goods and services. However, this is just an average. A family with a large mortgage in London and children in private school will have vastly different outgoings to a family renting in a more affordable region. Your own figures are the only ones that matter here.

Pro-Tip: Don’t forget the less frequent but significant costs. For holidays, home repairs, or Christmas, work out the annual cost and divide by 12 to get a monthly figure to add to your budget.

Step 2: Account for Surviving Income and State Support

Now that you have a figure for your monthly outgoings, you need to consider what income your family would still have available after your death. This is crucial for avoiding over-insurance (and paying unnecessarily high premiums).

Sources of Surviving Income:

• Surviving Partner's Net Income: Their take-home pay after tax and National Insurance.
• State Benefits: The main one is the Bereavement Support Payment.
• Investment Income: Dividends from shares or interest from savings.
• Rental Income: Net income from any buy-to-let properties.
• Death-in-Service Benefits: From your or your partner's employer. This is often a lump sum (e.g., 4x salary) but could provide a spouse's pension. Check your employment contracts.

A Closer Look at Bereavement Support Payment

This is a key state benefit that many people overlook. As of 2025, if you have paid sufficient National Insurance contributions, your surviving spouse or civil partner may be entitled to it. It’s available to those under State Pension age when their partner dies.

• Higher Rate (illustrative): For those with dependent children. This consists of an initial lump sum of £3,500 followed by 18 monthly payments of £350.
• Lower Rate (illustrative): For those without dependent children. This is an initial lump sum of £2,500 followed by 18 monthly payments of £100.

While helpful, these payments only last for 18 months. They provide a short-term buffer but are not a long-term solution for replacing a lost salary, which is precisely why Family Income Benefit is so vital.

Step 3: Calculate the Monthly Shortfall

This is the moment of truth. The calculation is straightforward:

Total Monthly Expenses - Total Surviving Monthly Income = Your Family Income Benefit Monthly Target

Let's use an example to bring this to life.

Case Study: The Jones Family

• David (35) and Sarah (34) have two children, aged 5 and 3.
• Illustrative estimate: David is the main earner, bringing home £3,500 net per month.
• Illustrative estimate: Sarah works part-time, bringing home £1,200 net per month.
• They live in a mortgaged home in the Midlands.

Step 1: The Jones's Monthly Expenses

Step 2: Their Surviving Income (if David were to pass away)

• Illustrative estimate: Sarah's Net Income: £1,200
• Illustrative estimate: Bereavement Support Payment (for the first 18 months): £350
• Illustrative estimate: Total Surviving Income (first 18 months): £1,550
• Illustrative estimate: Total Surviving Income (after 18 months): £1,200

Step 3: Calculating the Shortfall

• Illustrative estimate: Shortfall for the first 18 months: £4,000 (Expenses) - £1,550 (Income) = £2,450 per month
• Illustrative estimate: Shortfall after 18 months: £4,000 (Expenses) - £1,200 (Income) = £2,800 per month

David and Sarah decide to aim for a Family Income Benefit policy that pays out £2,800 per month. This covers the larger, long-term shortfall, ensuring Sarah and the children are secure even after the state support ends. (illustrative estimate)

Step 4: Choose the Right Policy Term

The "term" is the length of time the policy runs for. If you die within this period, the policy pays out. If you survive the term, the cover ends, and you get nothing back (unless you have a 'return of premium' option, which is rare and expensive).

The term for Family Income Benefit should be directly linked to your family's period of financial dependency. Ask yourself: "How long will my children rely on my income?"

• Until the Youngest Child is 18: This is the most common and basic choice.
• Until the Youngest Child is 21 or 25: A more prudent option, this provides support through university or higher education. The cost of raising a child to 18 in the UK is estimated by organisations like the Child Poverty Action Group to be well over £160,000 for a couple, and this figure rises significantly if they go into higher education.
• Until the Mortgage is Repaid: You could align the term with your mortgage, but this might leave a gap if you still have young children when the mortgage is paid off.
• Until Your Planned Retirement Age: This ensures your income is replaced right up until the point you would have stopped working anyway.

For the Jones family, their youngest child is 3. They want to ensure both children are supported through university, so they opt for a 22-year term. This would cover them until their youngest child is 25. If David were to die five years into the policy, the family would receive the £2,800 monthly income for the remaining 17 years of the term. (illustrative estimate)

Why Choose Family Income Benefit Over a Traditional Lump Sum?

Standard life insurance (Level Term Assurance) pays out a single, large cash sum. While this is perfect for clearing a large debt like a mortgage, it can be a double-edged sword for replacing an income.

Imagine a grieving partner suddenly receiving £500,000. They would need to make complex investment decisions under immense emotional distress to ensure that money generates an income and lasts for decades. Family Income Benefit removes this burden. The monthly payment arrives just like a salary, making household budgeting straightforward and secure. For many, this simplicity and security make FIB the superior choice for family protection. (illustrative estimate)

Fine-Tuning Your Policy: Essential Considerations

Once you've settled on your monthly benefit and term, there are a few more details to consider that can make a huge difference to the effectiveness of your cover.

Inflation-Proofing Your Policy (Indexation)

This is arguably the most important optional extra. A policy that pays out £2,500 per month might seem ample today, but what will that be worth in 10 or 20 years?

Inflation erodes the purchasing power of money. According to the ONS, the Consumer Prices Index (CPI) has shown that costs can rise significantly over time. A basket of goods costing £100 a decade ago could easily cost £130-£140 today.

An index-linked or inflation-protected policy increases your level of cover each year, typically in line with the Retail Prices Index (RPI) or CPI. Your premiums will also rise slightly to pay for the increased cover. While it makes the policy a little more expensive, it ensures the income your family receives will have the same real-terms value in the future as it does today. Without it, your family might face a financial shortfall years down the line.

Adding Critical Illness Cover

Many insurers allow you to add Critical Illness Cover to your Family Income Benefit policy. This means the policy would start paying out its monthly income not just on your death, but also if you were diagnosed with a specified serious illness, such as some forms of cancer, a heart attack, or a stroke.

This can be an invaluable lifeline, replacing your income if a severe illness prevents you from working, allowing you to focus on your recovery without financial worry.

Waiver of Premium

This is a small but mighty add-on. Waiver of Premium means that if you are unable to work for an extended period (usually over six months) due to illness or injury, the insurer will cover your policy premiums for you. This ensures your vital life insurance cover doesn't lapse at the very time you and your family are most financially vulnerable.

Protection for Business Owners, Directors and the Self-Employed

Your protection needs can be more complex if you don't have a traditional employment contract. Standard insurance is vital, but there are also specialist policies to consider.

• Self-Employed and Freelancers: Your income can be unpredictable. A robust Income Protection policy is arguably your most important cover. It pays you a monthly income if you can't work due to any illness or injury, protecting you while you're alive. This should be your first port of call, supplemented by Family Income Benefit to protect your family after you're gone.
• Company Directors: You can arrange certain policies through your limited company in a highly tax-efficient manner.
  • Relevant Life Cover: This is essentially a 'death-in-service' policy for directors. The company pays the premiums, which are typically an allowable business expense, and it doesn't count towards your annual pension allowance. It provides a lump sum payout to your family.
  • Executive Income Protection: Similar to a personal income protection plan, but paid for by the business. Again, the premiums are usually a tax-deductible expense, making it a very cost-effective way to secure your income.

Navigating these specialist options requires expertise. A broker can help you understand which structure is most beneficial for your specific business setup.

Beyond Insurance: Building Holistic Family Resilience

Financial protection is one part of a much larger picture. At WeCovr, we believe in a holistic approach to wellbeing, because a healthier life can lead to a longer, happier life (and often, lower insurance premiums).

• Nourish Your Body: A balanced diet rich in fruits, vegetables, and whole grains is foundational to good health. It helps manage weight, reduces the risk of chronic diseases, and boosts energy. To support our clients on their health journey, WeCovr provides complimentary access to our AI-powered calorie and nutrition tracking app, CalorieHero, helping you make informed choices every day.
• Move More: The NHS recommends at least 150 minutes of moderate-intensity activity or 75 minutes of vigorous-intensity activity a week. Regular exercise is proven to reduce the risk of major illnesses like heart disease, stroke, type 2 diabetes, and cancer by up to 50%.
• Prioritise Sleep: Chronic sleep deprivation is linked to a host of health problems, including a weakened immune system and an increased risk of serious medical conditions. Aim for 7-9 hours of quality sleep per night.
• Build an Emergency Fund: Insurance is for catastrophes; an emergency fund is for life's smaller financial bumps, like a car repair or broken boiler. Aim to save 3-6 months' worth of essential living expenses in an easy-access account.

By focusing on these pillars of health, you not only improve your quality of life but also present a lower risk to insurers, which can be reflected in more favourable premium rates.

Securing Your Family's Future, The Right Way

Calculating your Family Income Benefit needs is one of the most profound acts of financial care you can undertake for your family. It transforms an abstract fear into a concrete, manageable plan. By working through your expenses, accounting for all income sources, and choosing an appropriate term, you can create a safety net that is perfectly tailored to your family's unique circumstances.

The world of insurance can seem complex, with dozens of providers and subtle policy differences. It's our job to make it simple. At WeCovr, we specialise in helping people across the UK navigate these choices. We compare plans from all the major insurers to find the right cover, with the right features, at the best possible price. We're here to provide the clarity and confidence you need to protect the ones you love most.

Sources

• Office for National Statistics (ONS): Mortality, earnings, and household statistics.
• Financial Conduct Authority (FCA): Insurance and consumer protection guidance.
• Association of British Insurers (ABI): Life insurance and protection market publications.
• HMRC: Tax treatment guidance for relevant protection and benefits products.