Rhode Island Pre-Licensing Life & Health Insurance Practice Test

A family income policy is designed to provide a regular income benefit to a family in the event of the death of the primary earner. It typically includes a combination of a Whole Life policy and Decreasing Term insurance.

The Whole Life policy serves as a foundation offering lifelong coverage with a cash value component, which grows over time. This ensures that there is a guaranteed death benefit available no matter when the insured passes away.

The Decreasing Term insurance aspect complements the Whole Life component and is structured to provide a decreasing benefit amount over time, usually aligned with the family’s evolving financial needs, such as the mortgage balance or child-rearing costs. As time progresses, the term coverage diminishes, reflecting the decrease in the financial dependency of beneficiaries.

By combining these two types of insurance, a family income policy effectively provides both immediate financial assistance through the term insurance while ensuring long-term coverage and value through the Whole Life policy. This strategy aligns well with the financial planning goals of families needing a safety net during critical years when dependents are most reliant on the insured's income.