G purchased a Family Income policy at age 40, The policy has a 20-year rider period. If G were to die at age 50, how long would G’s family receive an income?
Options:
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The Correct Answer Is:
b. 10 years
The correct answer is b. 10 years.
Family Income policies are designed to provide a regular stream of income to the insured’s family in the event of the insured’s death. In this scenario, G purchased a Family Income policy at age 40 with a 20-year rider period.
This means that if G were to pass away at age 50, the policy would provide income to G’s family for a period of 10 years.
Here’s a detailed explanation of why the answer is correct:
When G purchased the policy at age 40, they chose a 20-year rider period. This means that the policy is designed to pay out for a duration of 20 years after the insured’s death.
However, if the insured were to pass away before the 20-year period is completed, the policy would still provide income to the family for the remaining years within the rider period.
In this case, G dies at age 50. Since G purchased the policy at age 40 and the rider period is 20 years, the policy will provide income for 10 years (20 years – 10 years = 10 years remaining in the rider period). Therefore, G’s family would receive income for a total of 10 years after G’s passing.
Now, let’s go through why the other options are not correct:
a. 5 years:
This option suggests that G’s family would receive income for 5 years after G’s passing. However, this is an incorrect assessment. The policy has a 20-year rider period, which means it is designed to provide income for a total of 20 years after the insured’s death.
In this case, G passed away at age 50, which means there are still 10 years remaining in the rider period. Therefore, the family will receive income for a total of 10 years, not just 5.
c. 15 years:
This option suggests that G’s family would receive income for 15 years after G’s passing. However, this is an overestimation. While the policy does have a 20-year rider period, G passed away at age 50.
Since the rider period starts at the time of policy purchase, there are only 10 years left in the rider period. Therefore, the family will receive income for a total of 10 years, not 15.
d. 20 years:
This option implies that G’s family would receive income for the full 20-year rider period regardless of when G passed away. However, this is incorrect. The rider period is designed to provide income for a maximum of 20 years after the insured’s death.
In this case, since G passed away at age 50, there are only 10 years left in the rider period. Therefore, the family will receive income for a total of 10 years, not the full 20 years.
Option a. (5 years) underestimates the policy’s coverage period. The 20-year rider period ensures financial support for two decades following the insured’s death. With G’s passing at age 50, 10 years remain within the rider period, providing income for a total of 10 years. Option c. (15 years) overestimates the coverage duration.
Despite the 20-year rider period, G’s passing at age 50 leaves only 10 years within the rider period. Consequently, the family receives income for a total of 10 years, not the suggested 15. Option d. (20 years) assumes uninterrupted coverage for the full rider period.
However, with G passing away at age 50, only 10 years remain in the rider period, resulting in a total income duration of 10 years. Therefore, the correct answer is b. (10 years).
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