Written by · Reviewed by Smiths Insurance & KiwiSaver — licensed Financial Advice Provider (FSP712931) · Last updated 2026-10-20

Life cover that pays a monthly family income

Family income cover is life insurance that pays your family a monthly amount for a set period after you die, instead of one lump sum. In New Zealand the two products we could verify are Chubb Life's Life Income Cover, which pays monthly for a term you choose from 5, 10, 15, 20, 25 or 30 years, and AIA Living's Family Protection, which pays monthly for a fixed term or to a nominated date. Momentum Life's Quick Life and Funeral Insurance pay lump sums only.

In short

How it works

A lump sum policy pays one amount on death. A monthly income policy pays a smaller amount each month for the chosen term, so a payment of $60,000 a year, paid monthly, for 10 years is $600,000 in total before any adjustment. The Chubb brochure lists these features for Life Income Cover:

Feature What the brochure says
Entry ages 10 to 70; cover does not expire
Payment term 5, 10, 15, 20, 25 or 30 years
Death benefit The monthly sum insured is payable for the selected term
Terminal illness The monthly sum insured may be payable if diagnosed with an illness likely to cause death within 12 months
Early funeral money Up to the first month's sum insured, to a maximum of $25,000, payable immediately; the rest of that month follows on a full claim
Life Events increase Up to $750 a month more after events such as a birth or adoption, without a new health assessment; within 180 days; ends at age 60; capped at 75 percent of the underwritten amount (Chubb brochure CIG0009 V6)
Premium review 1 year, 5 year, 5 year with 5 percent steps, or 10 year; the "to age" options are not available for Life Income Cover

AIA's product page describes Family Protection as "monthly payments to your family to maintain lifestyle", for ages 10 to 70 (AIA: Life insurance). Its wording says the benefit is paid monthly from when AIA is satisfied with the claim information, and that the first payment can be brought forward as a Bereavement Support Benefit of the lower of the monthly amount or $25,000. We did not read a premium or a full set of terms for it, so check the current wording before comparing it with Chubb.

Chubb's own underwriting guide shows how the insurer counts monthly cover against its limits, using a factor for each term: a level monthly benefit paid for 10 years counts as 97 times the monthly amount, 20 years as 159, and 30 years as 199 (Chubb Life Essential Underwriting Guide). On that basis $60,000 a year paid monthly over 10 years counts as $485,000 of cover, not $600,000. An indexed benefit counts for more (112 for 10 years), because it rises over time.

Worked example: $600,000 lump sum against $60,000 a year paid monthly

This is an illustration with assumed numbers, not a forecast. Suppose a family receives $600,000 as a lump sum, and draws $60,000 a year from it in equal monthly amounts ($5,000 each month). The table shows how long the money lasts at three assumed annual returns, with no tax, no fees, and a level draw, and then if the monthly draw rises 3 percent a year to match rising costs. The method: the annual return is applied monthly (one twelfth each month), each draw is taken at the end of the month, and a final part-payment counts as a month.

Assumed annual return on the lump sum Months it lasts, level $5,000 draw Months it lasts, draw rising 3% a year
0% 120 (exactly 10 years) 107
3% 143 123
5% 167 137

What this shows: a monthly benefit of $5,000 for 10 years pays exactly 120 months however markets behave and however the family manages money. The lump sum can last longer if it earns a return, but it can run out sooner if costs rise, if it earns nothing, or if the money is spent early on a mortgage or other debt. The monthly benefit also stays level unless it is indexed (Chubb's underwriting guide has a separate factor for indexed benefits), so its real value falls if prices rise. Neither is better as a rule: the monthly benefit gives a predictable amount for a known period, while the lump sum keeps flexibility and may last longer than the term, or run out sooner.

Who it suits, and who it does not

It can suit a household that wants the replacement of a salary to be predictable, or where the surviving partner would not want to manage a large sum. It is a poor fit if the main need is clearing a mortgage or other debt in one go, where a lump sum does the job. Many families split: a lump sum for debts plus monthly income for living costs. Chubb's brochure offers "a bit of both". Our guide on how much cover new parents might need walks through that split, and our guides to the cost of $250,000 and $100,000 of lump sum cover show what a lump sum costs.

Tax: what we could and could not confirm

Inland Revenue says "generally, insurance payouts are excluded income", but its page covers income protection (generally taxable, because it replaces lost income) and personal sickness insurance, and does not mention life insurance, death payouts or regular payouts (Inland Revenue: insurance payouts). We found no Inland Revenue statement on a monthly benefit paid on death. Do not assume it is tax-free: ask the insurer, an accountant or Inland Revenue.

Monthly cover that is not family income cover

Income protection pays you a monthly benefit if you cannot work through illness or injury; it stops when you die. Family income cover pays your family after you die. They are different products with different triggers: see life insurance and income protection. If you are grieving a death and money is the immediate problem, our money help after a partner dies guide covers support that exists.

How to arrange it

Chubb's brochure points buyers of Life Income Cover to a financial adviser, and the product is underwritten: Chubb counts it in the total sum insured for medical evidence, and adds its equivalent lump sum to any Life Cover when applying its limits, so the same medical thresholds apply. Quick Life, which accepts ages 18 to 65 with no health questions, is a lump sum; see Quick Life and guaranteed acceptance. If a lump sum from a guaranteed acceptance product is what you need, remember its early window: Quick Life excludes pre-existing conditions and suicide for the first 2 years, and Funeral Insurance pays only for accidents in its first 24 months. Total funeral premiums can end up larger than the benefit.

Who we are, and how we are paid

Advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). This page is general information, not advice. QuoteHub is a Momentum Life partner, and Smiths Insurance & KiwiSaver may receive a commission if you buy through our link; see how we are paid. Momentum Life Limited has a financial strength rating of B (Fair) from A.M. Best; Momentum's own table groups B in its "Vulnerable" range, and A.M. Best says the rating is not a recommendation (Momentum: financial strength). Momentum does not sell monthly family income cover, so the buttons on this page lead to its lump sum products only. Last reviewed 20 October 2026 by the QuoteHub Adviser Team.

Frequently asked questions

Can life insurance pay out monthly?

Yes, in at least two New Zealand products: Chubb Life's Life Income Cover pays a monthly amount for a term of 5 to 30 years, and AIA Living's Family Protection pays monthly for a fixed term or to a nominated date. Most life policies pay a lump sum.

Does Momentum Life pay a monthly income?

No. Its Quick Life and Funeral Insurance pay lump sums.

Is a monthly payout taxed?

We could not confirm this. Inland Revenue's insurance payouts page does not address a monthly death benefit.

References

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