Family Income Policy

What Does Family Income Policy Mean?

A family income policy is a type of life insurance that provides payments to the beneficiary immediately upon the policyholder’s death, as long as it occurs within the policy period. The beneficiary continues to receive payments until the end of the policy period. If the policyholder is still alive at the conclusion of the policy term, they receive a lump sum payment equivalent to the policy’s face value.

This type of policy is also referred to as decreasing-term life insurance. It falls under the broader category of term life insurance, which covers the policyholder for a fixed period rather than for life.

Insuranceopedia Explains Family Income Policy

In a typical life insurance policy, the timing of the insured’s death does not impact the payout to the beneficiary. However, in a family income policy, the beneficiary receives regular payments until the end of the policy period. This structure means that the total payout will be significantly higher if the insured dies in the early years of the policy and lower if they die closer to the end of the term.

For example, if a person purchases a family income policy for $200,000 with a duration of ten years and dies during the seventh year of that term, the beneficiary will receive payments for only three years (the remaining duration of the policy). After this period, the beneficiary will receive a one-time lump sum payment.

Premiums on this kind of policy are usually lower than level term coverage with the same starting face value, since the total payout drops as the term progresses. That makes it worth considering for households on a tight budget, including those shopping for life insurance for low-income families. Buyers comparing carriers that offer this structure can start with a list of the best life insurance companies.