Family Income Rider

A client who wants the policy to pay a monthly income to their family for a period after death should consider a:

1. A.An immediate annuity on the survivorIt would produce income, but only if the survivor buys it after the death using money from somewhere else. The stem asks for the policy itself to deliver the monthly stream.
2. B.Family income riderCorrect - monthly income for a period after death.
3. C.Single lump-sum-only policyPays once and hands the family the job of turning it into monthly income. That is precisely the arrangement the client wants to avoid.
4. D.A guaranteed insurability riderLets the insured purchase additional coverage later without new underwriting. It governs how much insurance can be bought, not how the benefit is paid out.

Why: A family income rider (using decreasing term) provides monthly income to the family for a set period after death.

One father adds a rider paying his family a monthly income from his death until 20 years after the POLICY WAS ISSUED. A colleague adds a rider paying a monthly income for a full 20 years measured from the DATE OF DEATH. Respectively, these riders are:

1. A.A family maintenance rider (level term) and a family income rider (decreasing term)This reverses the two. The rider measured from the policy date is the decreasing one.
2. B.Two identical riders sold under different namesThey differ in a way that matters: one shrinks as the policy ages and the other does not.
3. C.A family income rider (decreasing term) and a family maintenance rider (level term)Correct. Measuring from policy issue produces the decreasing family income rider; measuring from death produces the level family maintenance rider.
4. D.An other-insured rider and a payor benefit riderAn other-insured rider covers an additional person, and a payor benefit waives premiums on a juvenile policy. Neither pays a monthly income to survivors.

Why: A family income rider is decreasing term: the income period is measured from the policy date, so the later the death, the shorter the income stream and the smaller the remaining benefit. A family maintenance rider is level term: it pays a full income period beginning at death, so the benefit does not shrink with time. The clue is which date the 20 years is measured from. Review: family riders.

A young father wants coverage that would pay his family a MONTHLY INCOME from the date of his death until the date his youngest child turns 21, plus the base face amount. The rider designed for this is the:

1. A.Cost of living riderWrong. COL indexes the face amount - it creates no income stream.
2. B.Family maintenance rider paying 20 years from whenever death occursWrong-but-tempting. Maintenance pays a FULL period FROM DEATH - he wants payments ending at a fixed family milestone.
3. C.Family income rider, whose decreasing term pays income from death until the end of the period measured from issueCorrect. Income-to-a-fixed-horizon is the family income design.
4. D.Return of premium riderWrong. ROP refunds premiums at term's end - no survivor income.

Why: The family income rider adds decreasing term providing monthly income from death to the end of the period selected at issue; family maintenance substitutes level term paying for a full period following death. Citation: family income/maintenance rider design. Takeaway: income TO a date-from-issue = family income (decreasing); income FOR a period-from-death = family maintenance (level).

Two riders each pay a beneficiary a monthly income after the insured's death, in addition to the base face amount. Under rider ONE the income runs only until the end of a period measured from the POLICY DATE, so the later the death, the fewer payments the family receives. Under rider TWO the income runs for a full stated number of years measured from the DATE OF DEATH, no matter when death occurs. Identify each rider and the kind of term insurance that funds it.

1. A.Rider ONE is a family maintenance rider funded by level term, and rider TWO is a family income rider funded by decreasing term.The labels are swapped. A benefit that shrinks as the policy date recedes is decreasing term and is the family income design; a benefit measured from the date of death is level.
2. B.Rider ONE is a FAMILY INCOME rider funded by DECREASING term; rider TWO is a FAMILY MAINTENANCE rider funded by LEVEL term.Correct. Measuring the payout period from the policy date makes the remaining obligation shrink over time, which decreasing term funds, while measuring from the date of death keeps it level.
3. C.They are the same rider under two names, and the only real difference is the premium mode.Premium mode is how often a premium is paid and has nothing to do with either benefit structure. These are genuinely different riders with different costs.
4. D.Rider ONE is an accelerated death benefit and rider TWO is a settlement option.An accelerated death benefit pays part of the face amount to the living insured on terminal or chronic illness, and a settlement option is how a beneficiary elects to receive proceeds already payable. Neither adds income on top of the face amount.

Why: A FAMILY INCOME rider pays a monthly income from the insured's death to the end of a period measured from the POLICY date. Because the remaining payout shrinks as time passes, the rider is funded by DECREASING term. A FAMILY MAINTENANCE rider pays a monthly income for a full stated number of years measured from the DATE OF DEATH, so the obligation is the same size whenever death occurs, and it is funded by LEVEL term. Both riders pay income on top of the base policy's face amount, which is paid separately.