Family Income Insurance

Family Income Insurance

Nobody wants to think about losing a loved one, but the trusted cliché of better safe than sorry does have a point. If, god forbid, something should happen to a family income provider for your family, your family might be in serious financial troubles. This is why family income insurance, sometimes more commonly known as family income benefit insurance, is such a good idea to put family investments in.

Family income insurance is a monthly income that continues at the level specified in a policyholder’s policy in the case the policyholder dies while still covered. The monthly income will continue until the predetermined date of termination. At the end of the policy term the beneficiary, along with the monthly incomes they received, will get the face value of the policy in a lump sum. Family income insurance is very common among families with children. Family income insurance is a type of life insurance that assures the family, more specifically, the children, will continue to have a form of income in the event of a parent’s death.

There are two kinds of family income insurance:

  1. Single family income insurance protection – The insurance plan is held by one policyholder.
  2. Joint family income insurance policy – There are two policyholders that gets paid out in the event of one or the others death. If both die while the policy is still active, the policy will continue to pay only one monthly income.

General Terms of Family Income Insurance Paid

There are multiple ways a family income insurance policy can be funded. Payments can either be indexed to raise and fall in tune with inflation and the economy, or continue at a flat rate throughout the length of the coverage.  Coverage is generally given only during the growth and development of children – what is deemed their “years of growth”.

If the policyholder lives through the allotted time of the policy, they receive a fair value or face amount of the policy.

Here is an example: A mother and father take out a joint family income insurane plan for 20 years for $200,000. If, at the end of the 20 years (around when the children turn 20) both parents are still alive they would receive in full the $200,000. If one of the parents died before the 20 year policy was up, the beneficiary – living parent and children – would receive 1% of the face value every month. In this case, they would receive $20,000 every month until the 20 year policy concluded. At this time the beneficiaries would also receive $200,000.

Because this type of insurance is for the time where children are being raised, many companies are decreasing the time of coverage because families tend to get this insurance in the middle of their children’s development.

Differences between Family Income Insurance Policies

Family income insurance protection can be given and distributed in different ways. Policies can be extended and even converted into a full blown permanent life policy. If you make your family income insurance protection renewable you can make it so your family continues to get payments even after the policy has expired. However, keep in mind that the renewable and convertible packages have a higher insurance premium than the typical family income insurance plans. Another cliché saying comes to mind here – no such thing as a free lunch!

Not Just in the Case of Death

As a note, family income insurance plans are not only used in the event of a death. These plans can also be used in divorce cases to ensure the financial safety and stability of children growing up in a one parent household if the second parent should die before the allotted time of child support expires.