Which statement correctly describes a family income rider on a life insurance policy?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A family income rider is a decreasing term rider attached to a base life policy. If the insured dies during the income period, the beneficiary receives a monthly income for the remainder of the period, typically until children reach a certain age or for a stated number of years. This provides income replacement during the dependency years when the family most needs support. The base policy separately pays its own death benefit. The rider is designed for young families that need income protection while children are still dependent and the family's earning capacity is critical.
Why the other options are wrong
- B) Adding a second insured describes a family rider or joint-life coverage, not a provision that pays periodic income to a beneficiary. The family income rider focuses on income replacement rather than a second life.
- C) The rider pays periodic income rather than a lump sum; the base policy, not the rider, pays the lump sum death benefit at death. The income stream is the rider's contribution to the plan.
- D) The rider's income payments diminish over time as the income period shortens, but the base death benefit is not reduced as children age. The decreasing element applies to the term rider, not the base coverage.
Memory hook
Family income rider: monthly paychecks to your family while the kids still need them.