Life Insurance: What Is a Family Income Policy?

A family income policy is a type of life insurance that is designed specifically for families with young children. The family income policy is a type of term life insurance. The purchaser of this type of life insurance policy is typically concerned with ongoing costs that are associated with raising children.

Family Income Policy

With this type of policy, if the insured passes away during the initial term of the policy, the beneficiaries will receive a regular monthly payment for a certain amount of time. At the end of the policy term, the beneficiary is also going to receive the face value of the policy in a lump sum.

Example

Let's say that a father decided to purchase a 20 year, $500,000 family income policy. After five years, the father passes away. At that point, the wife would receive a regular monthly payment for the next 15 years. The monthly payment is usually a certain percentage of the face value of the policy. For example, they might pay 1 percent of the face value every month, or $5000 in this case. At the end of the 20 year term, the wife would also receive $500,000. 

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