Family Income Policy

More households are looking at the promise of life insurance to secure their financial future. There are many forms of life insurance, each catered to the needs of different segments of the population. The aim of a family income policy is to strengthen the ability of families to nurture and support their children so that they can afford a quality lifestyle.


1. Defining Family Income Policy

Family income policy is one of the myriad of insurance policies that supplements a household's income. It covers the critical period when children are growing up. As a kind of life insurance, this policy combines ordinary life and decreasing term insurance.

Family income policy gives regular income payments until the applied period if the insured party dies before the period ends. If the insured party is still living after the specific period, he will receive a fair value or face amount of the policy. The main thrust of family income policy is to ensure financial support to children during their formative years. In the perspective of families and society, children without enough financial support during their growing years are the hardest to bear. Thus, the intention of family income policy is to hold the security of these children through unfortunate events experienced by their parents or guardians. This will give them the best chance to live a normal childhood and move to adulthood with equal opportunities compared to other children.

2. Terms of Family Income Policy

The basic foundation of family income policy is regular benefits during the period of time that covers the growth of the children. Usually, the insurance term is twenty years. After this twenty year period, the policy holder will receive the full face amount of the policy. As an example, given the face value of an income policy at $150,000 on a 20 year period, the insured part will receive $150,000 at the end of the 20 year term. If the insured party dies within the specified period, the beneficiary will usually receive 1% of the face value every month - in this case, $1,500 per month for the remainder of the insurance term. At the end of the period, the beneficiary will also receive $150,000, which is the face amount. This insurance term is designed to increase the monthly income of families left by the insured individual.

Various life insurance policies in the market offer decreasing term insurance since households see the need to provide for their family in the middle of child-rearing. This policy is also known as family income rider or family maintenance policy.

3. Term Insurance

A family income policy is a decreasing term insurance. Since all life insurance policies are predicated on death benefits, how you get these benefits and on what terms separate one insurance policy from the other.

Term insurance is the most basic kind of life insurance that pays only a death benefit. Under a term insurance you can choose between different variables that will define your family income policy. One variable is the amount of coverage paid out to the beneficiary. Some policies adapt the "level coverage" where your family will be paid a fixed amount throughout the insurance period. Meanwhile, declining term insurance means that the amount of payment given to the beneficiary decreases as the period matures. Family income policy usually follows declining term policy.

Declining term policy is critical for families who need larger payments upfront while they are mostly adjusting to their personal and financial losses. As time goes on, the beneficiary recovers financially and they won't depend much on insurance benefits by the time the term ends.

Term insurance is practical for families on a tight budget. You have the flexibility to choose the stage of your life where insurance may be critical and you can focus your payments on that period.

4. Variations of Family Income Policy

You can extend the term of your family income policy by making your insurance premium renewable. This provision is handy if your family still needs the money from insurance proceeds after the period. A non-renewable policy simply stops payment after the term ends. You can also convert your family income policy to a permanent or whole life policy. With more options, you will have more flexibility in treating your insurance policy so that you can cope through all financial contingencies. Both renewable and convertible policies have a higher insurance premium than non-renewable and non-convertible policies.

Family income policy usually designates all family members as the beneficiary in the term insurance. However, you can also designate a primary policy holder to be covered by a whole life insurance while other members of the family are covered by term insurance. Usually, the spouse is given the whole life insurance while the children receive term insurance benefits.

5. The Need for Life Insurance

Getting life insurance seems to pose mixed feelings. Creating contingencies assuming a family death is hard to reconcile. However, if your family depends on your income for their security and well-being, answering these questions is not hard after all.

There are many life insurance policies and family income policy is just one of them. Each brings different benefits and intent for you and your family. Still, the central thought of life insurance policies are the same - it gives you cash to your family after you die so that they can continue to live their normal lives without your guidance while allowing your financial support to continue without complications. With policies such as these, it gives families an easier financial transition after a sudden and unfortunate event. The money taken from the life insurance policy is crucial for families with aspirations and goals. Life insurance payments can be used to pay for your mortgage, daily expenses, loans, university education, and other important expenses. It allows your family to move forward so as not to magnify the stress resulting from your death.

A family income policy captures the essence and importance of life insurance. With this policy, the childhood and growth of your children is the central issue. At a time where they are most vulnerable, a family income policy surrounds your children and your loved ones with financial security to continue their lives and allow them to become what they want to be.

6. Overcoming Excuses for Getting a Family Income Policy

Life insurance is an important step that you can take for you and your family. Given the benefits that you can get from life insurance, it almost seems like this is what every family needs. The numbers support this stance as 81% of Americans say that they need any form of life insurance. However, only half of them have a purchased policy. Although we acknowledge the need, most have not taken steps to get one

If you are pondering on purchasing a life insurance policy, you might give reasons and excuses that will hinder you from making the right decision. One of the biggest obstacles that families attribute to life insurance is its cost. For some, it is just too expensive to even consider it. However, this excuse goes right out the window if we consider the true value of life insurance. The benefit of life insurance transcends what the numbers tell you. The sense of security cannot be measured by price. Knowing that you made the right decision for your family's long term growth is empowering. At the same time, ensuring your family's future is more than enough to justify the price of a life insurance policy. Not having life insurance may even be more costly to your family in the long term.

It is time to make hard decisions and purchase a life insurance policy. By getting one, you are already better off than most Americans that did not purchase insurance policies. There are no guarantees in life; that is why every day that you hold off before getting an insurance policy is a day delayed.

7. Finding a Timely Life Insurance Policy

Life insurance policies are distinct from each other based on the time period that they can be applied. Each stage of your life, from your most abundant period to the vulnerable times of your life, will justify your need for life insurance.

When you get married, you usually have the buffer of a second income taken from the income of your spouse to support your expenses. But if one suddenly dies, the spouse that was left behind might face serious financial hardship with only one source of income to rely on. With so many expense items that run a family, your spouse might not be able to cope with the trying times ahead. Life insurance policies such as family income insurance supplements your spouse's income to cover the funds lost after your death. Life insurance does not only help your spouse get through life. When you decide to have children, you will be adding new people that will depend on you financially. Having children is always a big life decision. Getting an insurance policy for your children is just as important.

Your insurance can also save your home. If you suddenly die, your investments can also be disrupted and your family will have a hard time because of it. Your death should not be the reason why your family needs to move out to a smaller and a less expensive home. Life insurance can certainly help you maintain your lifestyle in every turn whether you are married, single, planning for retirement, or changing jobs.

8. Knowing How Much You Need

Getting a life insurance policy is a serious financial decision. While we can admit that we need life insurance, determining how much you need is just as pivotal and tough a decision. Each of us has different financial goals and responsibilities that we need to consider before arriving at a suitable life insurance policy for us. A more educated purchase will give you the best chance of having timely insurance coverage, and a better outlook for you and your family.

Buying the right family income policy will take some analysis. First, you need to gather all financial information and estimate the needs of your family. Your insurance coverage should not only take care of your financial needs now, but should also project the living expenses of your family in the future. Your family will have different set of expenses at each of their stages in life. Your life insurance policy can help fund a wide range of immediate expenses such as funeral cost, uncovered medical expenses, mortgage, debt, and taxes.

Then, your family will deal with ongoing expenses such as food and groceries, housing, utilities, transportation, health care, and clothing. Your insurance policy can help support these expenses by giving monthly income supplements. After which, you have to add long term expenses such as college education and retirement. It is your job to think about the financial situation of your family now and in the future to know how much insurance you need.

9. Finding Income Sources in Planning Life Insurance

Once you know the list of current and future expenses that your family will encounter, you need to think about how your family can have the income stream to support these expenses. Imagine a family without you as their financial guardian. Will they be able to financially cope well without you? Do you expect your relatives to provide help or income for them? Is your son or daughter nearing graduation and can they help out with the finances in the future? Analyze the different income sources to assess how much insurance is needed for your family.

Finding the perfect insurance policy is not easy. Since life's circumstances are not guaranteed, you may overestimate or underestimate the future expenses of your family. At the same time, you need to take the health of the economy into consideration. The important thing is that you crossed the line and made the right decision to purchase a family income policy for your spouse and your children to soften the blow of life's changes. Knowing how much life insurance you need may be a game of predictions. Thankfully, there are insurance calculators, insurance analysts, and other resources that can help you make a better decision.
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