Definition and Meaning
Adjustment Income in life insurance refers to a benefit that provides a temporary income to the beneficiary following the death of the primary wage earner. This income acts as a financial bridge, covering essential expenses until the beneficiary is able to become self-sufficient.
Etymology
The term “adjustment income” combines “adjustment,” derived from the verb “adjust”, meaning to modify or achieve a new balance, and “income,” from the Latin “incōmere,” meaning to come in or arrive. It reflects the idea of providing a balanced financial cushion during a period of transition.
Background
Adjustment income is a key feature in many life insurance policies aimed at easing the financial burden on beneficiaries after the demise of the insured person. It is particularly crucial in households where the deceased was the sole or primary breadwinner.
Key Takeaways
- Purpose: To offer financial stability during a period of adjustment following the primary wage earner’s death.
- Duration: Generally provided for a limited period until the beneficiary gains financial independence.
- Amount: Varies based on the policy terms and the specific needs of the beneficiary, often aligned with the wage earner’s income.
Differences and Similarities
Differences:
- Versus Lump Sum Benefit: Adjustment income is disbursed periodically (e.g., monthly), unlike a lump sum benefit which is paid once.
- Versus Permanent Income: Adjustment income is temporary, while some policies may offer permanent replacement income.
Similarities:
- Financial Protection: Both adjustment income and lump sum benefits aim to provide financial security to the beneficiaries.
- Life Insurance Components: Both are integral parts of life insurance policies, designed to cater to different financial needs.
Synonyms
- Income Protection Benefit
- Temporary Income Benefit
- Transitional Income
Antonyms
- Lump Sum Payment
- One-time Death Benefit
Related Terms with Definitions
- Beneficiary: The person who receives the insurance benefit after the insured person’s death.
- Primary Wage Earner: The main individual earning the household income.
- Income Replacement: Benefits paid to offset the loss of income.
Frequently Asked Questions
What is the main purpose of adjustment income?
The main purpose is to provide a temporary source of funds to the beneficiary, helping cover living expenses until they are financially independent.
How long is adjustment income provided?
The duration varies based on policy terms but typically lasts until the beneficiary is expected to become self-sufficient.
How is the amount of adjustment income determined?
The amount is typically based on the deceased’s income and the financial needs of the beneficiary, detailed at the policy’s inception.
Can adjustment income be customized?
Yes, most policies offer customization to fit the specific needs and circumstances of the insured and their beneficiary.
Quirky Facts
- The concept of providing financial support to families after a wage earner’s death dates back to ancient Roman societies, often through communal funds.
Quotations
“Insurance is not just a policy; it’s a safeguard for the future, giving hope where there might be despair.” - Harold G. Shaw
Proverbs
“Plan for the best, prepare for the worst.” – Unknown
Literature and Other Sources for Further Studies
- Life Insurance and Its Importance by Daniel Hertford
- Family Financial Security: The Role of Adjustment Income by Marianne Leigh
- The Essential Guide to Life Insurance by Robert Benson
Government Regulations
Adjustment income benefits are regulated under various insurance acts and state-specific laws in different countries to ensure fair practices and protection for the beneficiaries.
Published on 2023-10-04 by Laura M. Thompson in the “Insurance Terms Lexicon”. Remember, “An umbrella is for the uncertain weather; an adjustment income, for life’s unpredictable storms.” 🌦️ Keep assured and stay insured!
