What is Adjustment Income?

Adjustment income is any type of income stream that is paid to a beneficiary or dependent in the event that the primary wage earner dies. Usually adjustment income comes into play when benefits from insurance policies such as term life, whole life, or accidental death benefits are dispersed. In most cases, the focus is to provide the beneficiary with the financial resources needed to survive the loss of the loved one and begin making preparations for becoming self-supporting in the future.

One of the more common examples of adjustment income involves the death of a spouse. When the primary breadwinner in the marriage dies, the remaining partner faces the task of not only mourning his or her loss, but also the necessity of dealing with any end of life expenses, managing a household budget, and in general preparing for life without the loved one. This is where various types of insurance can be quite helpful. Depending on the type of insurance policy involved, the surviving partner may receive a lump sum to settle expenses and provide living income for several months. Some policies are also structured to issue a series of monthly payments to the survivor, effectively replacing at least a portion of the income previously generated by the deceased.

There are several different ways to create an adjustment income stream. One approach is to makes sure the insurance coverage includes an accidental death benefit. Should the insured party perish in an accident or some other unforeseen event, the beneficiary receives financial support that makes it easier to manage finances during those first critical months. Some couples arrange for what is known as a joint and survivor annuity, which effectively covers both partners in the marriage, and extends benefits to the surviving partner. Variable death benefits provide financial resources based on the cause of death, while term-life or whole life coverage may be structured to issue a lump sum once the claim has been filed and approved.

Adjustment income may only last for a few months, or for several years, depending on how the plan is structured. In evaluating different ways to provide financial support for loved ones, it is essential to look at the overall circumstances of the household, including monthly living expenses, and the ability of the beneficiary to eventually become self-supporting. A competent financial counselor or insurance agent can provide details on different approaches to creating this sort of ongoing adjustment income scheme, and make recommendations based on those factors.