I started Insurance Blog by Chris™ because I have a passion for insurance. Here at the blog, our job is to educate and inform people about the best insurance for them. Since then, we have grown into national brands with a large team of researchers helping people understand all forms of insurance.

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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insu...

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Reviewed by Rachael Brennan
Licensed Insurance Agent

UPDATED: Nov 19, 2021

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Are you ever concerned about how your beneficiaries will handle the proceeds of your life insurance policy?

If so, a family income benefit rider may give you a surprising amount of flexibility and control over how—and when—the policy benefits will be distributed to your loved ones.

In fact, a family income rider may go a long way toward allowing your family to continue to receive a monthly income in the absence of your own salary.

What is a Family Income Rider on a Life Insurance Policy?

With a typical life insurance policy, the entire death benefit is paid out to your beneficiaries upon your death.

However, if you prefer a more gradual distribution, you can add a family income benefit rider to spread those payments out over as much time as you feel is appropriate.

These riders are quite flexible as well. You can choose to have a certain percentage of your death benefit distributed upon your death, with the remainder parceled out in installments over a predetermined amount of time.

RELATED: 5 Critical Tips You Must Know Before Buying Life Insurance

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How It Works

Using a family income benefit rider, you can determine the number of months and years you want a monthly payment made to your beneficiaries.

The number of months or years that payments will be made is largely determined by your age.

As a 30-year-old with a spouse and small children, you may want a family income benefit rider to make payments over 20 years.

As a 40-year-old with teenagers, you may want the payments to spread out over just 10 years. It all depends on the expected need.

The basic concept is to use the family income benefit rider to replace your income for your family.

The family income benefit rider is paid out in addition to the death benefit. For example, if you were to take a 20-year term policy and die after seven years, the rider can pay out income for 13 years.

The benefit will usually be based on a percentage of the death benefit.

For example, a $400,000 policy with a family income benefit rider percentage of 1% will pay out $4000 per month for the balance of the term stipulated.

At the end of the payout term, beneficiaries may receive whatever proceeds remain in the policy that had not been distributed under the family income benefit rider.

Cost

One of the major advantages of a family income benefit rider is that it will result in no major increase in your monthly premium.

The low (or no) premium adjustment has to do with the fact that while the insurance company holds onto the death benefit in your policy, they earn the interest income on those funds.

Maybe more important, the family benefit rider only affects the distribution of your death benefit proceeds.

It doesn’t represent a substantial additional cost to the insurance company, beyond the administration of monthly payments.

If you think a family income benefit rider could work for you, you should always inquire about it during application.

The cost will not generally be a significant factor.

 

Why You Might Consider Adding a Family Income Rider to Your Policy

Direct Replacement of Your Income

Though the original purpose of life insurance was to cover funeral expenses, today it’s much more commonly used to replace lost income.

This largely explains the fact that life insurance policies are now commonly for hundreds of thousands and even millions of dollars.

Using a family income benefit rider is the best way to ensure that your life insurance proceeds will be used for the intended purpose, which is to provide for the support of your loved ones over time.

You can roughly match the monthly payout with your current income, providing for 100% of your income being replaced upon your death.

Concern Over the Use of the Death Benefit

Not everyone has trusted beneficiaries to properly manage and allocate their life insurance policy proceeds.

It may be that you have a spouse, a child, or other beneficiaries you don’t completely trust to manage the proceeds in an efficient way.

You may even fear that he or she will dissipate the funds early in the process.

RELATED: Check Sample Life Insurance Rates by Age (No Personal Info Required)

For example, let’s say you have a $500,000 policy naming your spouse as a beneficiary, with the understanding that the funds will be used gradually to provide for the support of your young children.

If you have concerns that your spouse might dissipate the funds within the first two or three years, setting up a family income benefit rider will prevent that from happening.

They will receive only the amount specified each month, ensuring the family’s support for as long as you deem necessary.

This can be especially important if you are the primary or sole income earner in your household.

It will enable you to use the life insurance policy to replace your income in your absence.

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How to Add a Family Income Rider to Your New or Existing Life Insurance Policy

Like all life insurance riders, the best time to add a family income benefit rider to your policy is when you first purchase it. That will ensure that your wishes are carried out fully.

But, even if you don’t choose a family income benefit rider at the time of purchase, it may still be possible to add the rider to an existing policy.

After all, it’s really just the distribution portion of the policy; it doesn’t have a material effect on the policy itself.

If you’d like to consider purchasing a life insurance policy, and adding important options like the family income benefit rider, it’s best to work with experienced insurance brokers.

Not only do we know the industry, but we know the insurance companies providing coverage. We can choose a company that will best accommodate your own preferences and needs, and always at the most cost-efficient premium level for your policy.

What’s also important is that you’re made aware of all the options you have, another major advantage we provide as insurance brokers.

Unlike the many online-only insurance providers, we provide direct broker assistance to help you get the policy and options you want. You may not always know exactly what those options are, and that’s where our experience will make the difference.

If you want to customize your life insurance policy, avoid the temptation to go with the do-it-yourself online providers. We know all the right questions to ask, and can handle all the paperwork for you.

You won’t need to guess, and you won’t need to deal with complicated questions and provisions.

You can also rest easy knowing that you won’t pay anything extra than you would if you were to make an application directly with a life insurance company. That’s because the life insurance companies pay for our services, at no additional cost to you.

If you’re looking to add a family income benefit rider—or any other type of rider—or if you have any significant health conditions or specific life insurance needs, we know the best life insurance companies to apply to.

Let us help you navigate the often-complicated world of life insurance.