Family Income Policy
Definition - What does Family Income Policy mean?
A family income policy is a type of life insurance that pays its beneficiary the moment the policyholder dies, as long as it is within the policy period. The beneficiary collects payments until the end of the policy period. If the policyholder is still alive after the end of the policy period, they receive a lump sum payment equivalent to the policy's face value.
It is also known as a decreasing-term life insurance.
Insuranceopedia explains Family Income Policy
With a typical life insurance policy, the time of death of the insured does not affect the payout to the beneficiary. However, with a family income policy, beneficiary receives regular payments until the end of the policy period. This means that the payout will be considerably higher if the insured dies in the early years of the policy and less if they die near the end of its policy period.
Suppose a person purchases a family income policy for $200,000 with a period of ten years and they die during the seventh year of that period. In that case, the beneficiary will only get payments for three years (the remainder of the policy period).
After this period, the beneficiary gets a one-time lump sum payment.