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Ensuring your family is taken care of in the event of your death is a concern for many primary breadwinners. Insurance options such as family income policies are designed to provide peace of mind and protect your family from issues related to income loss if you pass away.

What Is a Family Income Policy?

Also referred to as decreasing-term life insurance, family income policies are one of the few options where the value of the policy is dependent on the time of the policyholder's death.

Basically, the policy involves a set period of time, and what happens within that time frame determines how the policy is paid out. If the policyholder is still alive after the period is over, the value of the policy is paid to them in one payment. If the policyholder dies within the policy period, the beneficiary receives payments until the period ends.

The beneficiary is paid more benefits the earlier the policyholder dies since they receive regular payments for a longer portion of the policy period. That’s why this policy is also called a decreasing-term life policy; the value of the policy decreases over time.

What Are the Benefits of a Family Income Policy?

At first glance, it might seem strange to buy a policy that loses value, but this specialized policy has benefits for people in certain situations. Commonly, people who have younger children tend to purchase these policies. The period usually aligns with when the children will still be financial dependents of any surviving spouse or guardian. The policy ensures that if the breadwinner dies while the children are still dependents, their caretaker can provide for them without having to create new sources of income. 

What Is a Family Maintenance Policy?

A family maintenance policy resembles a family income policy in that it pays out to the beneficiaries monthly as opposed to in one lump sum. However, it doesn't have a decreasing term as the family income policy does.

This option is preferable to some policyholders because the beneficiaries don’t have to handle a large amount of money all at once. It can also help provide a sense of normalcy for the beneficiaries and lets them maintain their lives without finding a new source of income. This type of insurance policy is typically designed for policyholders with dependents, especially children who haven't left the nest. However, if you expect a lot of expenses will need to be dealt with immediately, this type of policy may not be the best choice or might need to be supplemented with a different type of life insurance.

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