A whole life policyowner adds a family income rider. If the insured dies during the rider's coverage period, the rider will:

Why A is correct

A family income rider is a decreasing term rider attached to a permanent policy. If the insured dies while the rider is in force, the beneficiary receives monthly income for the number of years remaining in the rider's period, such as 10 or 20 years. In addition, the base whole life policy's face amount is paid at death. The rider effectively replaces the income the insured would have earned. It does not alter cash value, does not waive premiums (that is the waiver of premium rider), and does not double the death benefit.

Why the other options are wrong

• B) The rider provides income at death; it has no effect on the base policy's cash value accumulation.
• C) Waiving future premiums is the function of a waiver of premium rider, not a family income rider.
• D) The rider pays monthly income for the remaining period, not a lump sum that is a multiple of the face amount.

Memory hook

Family income rider = an income pipeline for the family for a set number of years after the wage earner dies.

Why A is correct

A family income rider pays the insured's family a monthly income for the remainder of a stated period if the insured dies during that period. For example, a 20-year family income rider pays monthly benefits until 20 years from the policy's issue date, after which the rider expires and only the base policy's death benefit remains payable. The rider's cost is relatively low because the monthly income is a fraction of the face amount and the exposure is limited to the income period. It does not replace the death benefit, which is still paid under the base policy.

Why the other options are wrong

• The benefit is paid as a monthly income during the period, not as a single lump sum at the end. The lump-sum portion comes from the base whole life policy's death benefit.
• Tying benefits to the consumer price index is the function of a cost-of-living rider, not a family income rider, which pays a level monthly amount during the income period. This answer describes a different situation from the one in the question and is therefore incorrect under the facts given here.
• Waiving premiums is a separate rider triggered by disability, not by age; a family income rider does not waive premiums when the insured turns 65. This choice does not fit the arrangement described in the question, so it is clearly not the right option to choose.

Memory hook

The family income rider delivers monthly checks for the rest of the period.

Why A is correct

A family income rider supplements a permanent or term policy by paying a monthly income to the insured's family from the date of death until the end of the rider's income period. The family receives both the policy's basic death benefit and, during the income period, a stream of monthly payments. It addresses the family's ongoing living-expense needs rather than providing a single lump sum.

Why the other options are wrong

• B) A guaranteed insurability rider lets the insured buy additional coverage at future dates without evidence of insurability; it does not pay monthly income.
• C) A cost of living rider increases the death benefit periodically to offset inflation; it provides no monthly income stream.
• D) A return of premium rider refunds the premiums paid if death occurs within a specified period; it does not pay a monthly family income.

Memory hook

Family income rider = a salary substitute for the family after death, month after month, until the period ends.