What Is A Family Term Rider?

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A family income rider is an addition to a life insurance policy that provides the beneficiary with an amount of money equal to the policyholder’s monthly income in the event the policyholder dies. The rider is a type of death benefit and specifies the term for the additional coverage, eventually expiring if it’s not activated by the death of the insured.

Features of a Family Income Rider
Provides a regular stream of income to the policyholder’s family in addition to the lump-sum death benefit.
Income is paid out in installments based on the size of the death benefit or the number of months the policyholder would like their beneficiaries to receive payments.
The beneficiary may choose to receive a lump sum rather than monthly payments.
Designed for individuals who are the sole earning members of their family to ensure financial stability for their beneficiaries.
Must be claimed within a certain period of time specified in the policy.

Family income riders are offered for little or no cost to policyholders because the death benefits are earning interest while held by the insurance company as distributions are made. Adding a rider will often increase your premium, though it will extend the coverage of your standard policy.

Consider a father who decides to purchase a 20-year, $500,000 life insurance policy with a family income rider. After five years, the father passes away. His death triggers the death benefit for the wife, who then receives a regular monthly payment for the next 15 years, as stipulated by the family income rider. The monthly payment is usually a certain percentage of the face value of the policy. In addition, at the end of the 20-year term, the wife would also receive the $500,000 lump-sum payment.

Riders may vary in length, and there is a cost-benefit analysis on whether to sign up for a rider. In some cases, individuals or families may need additional coverage beyond what a standard policy may offer. In these situations, it is suggested these individuals discuss rider options with their financial or investment agent to best understand their options.

In summary, a family income rider is an insurance policy add-on that provides an additional benefit to the policyholder’s beneficiaries in the event of their death. This rider is designed to provide a regular stream of income to the policyholder’s family, typically for a specified period of time.

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