Family Income Policy

A family income policy pays a monthly income for the remainder of the term, in the event of premature death of the policyholder.

For example, a male at age 30 can take a 30 year policy to provide a family income of $3,000 a month for an annual premium payable of $1,068 (based on my benchmark).

If death occurs at the start, the policy pays $3,000 a month for the 30 years, or a total of $1,080,000 (i.e. more than $1 million). If death occurs at end of 10 years, the income benefit is payable for 20 years (total of $720,000). If death occurs at the end of 20 years, the benefit if payable for 10 years (total of $360,000). If premature death does not occur, the policy expires at the end of 30 years, without any cash value.

The policy can be taken to provide a lower monthly benefit at a proportionately reduced premium. For example, the premium payable for a monthly benefit of $1,500 is $534.

The advantages of this policy are:

1. It provides a very large benefit at an afforable premium
2. It pays a monthly income, so the family does not have to worry about investing a lump sum payment.
3. The policyholder can invest the savings in a low cost, diversified investment fund to earn a higher return, compared to a whole life policy.