What is face value in life insurance?
The face value of life insurance is similar to a death benefit To calculate the face value of a life insurance policy, you would add the death benefit plus any policy riders. Next, subtract the amount of any loans you have taken out of a life insurance policy.
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Kalyn Johnson
Insurance Claims Support & Sr. Adjuster
Kalyn grew up in an insurance family with a grandfather, aunt, and uncle leading successful careers as insurance agents. She soon found she has similar interests and followed in their footsteps. After spending about ten years working in the insurance industry as both an appraiser dispatcher and a senior property claims adjuster, she decided to combine her years of insurance experience with another...
Insurance Claims Support & Sr. Adjuster
UPDATED: Jan 8, 2024
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Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance provider and cannot guarantee quotes from any single provider. Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance related. We update our site regularly, and all content is reviewed by life insurance experts.
UPDATED: Jan 8, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance provider and cannot guarantee quotes from any single provider. Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- The face value of a life insurance policy is the same thing as a death benefit
- The life insurance face value is the amount of money your beneficiaries will receive after you pass away
- If you receive the cash value of your life insurance policy, you are likely forfeiting your right to any face value in the long term
When it comes to life insurance, the face value of a policy is extremely important. The face value of a life insurance policy is one component that can provide support and assistance to family members and any other beneficiaries of your policy.
The face value of life insurance policy is the dollar amount that defines the actual worth of your policy. Also referred to as a life insurance death benefit, the face value is the amount of money your beneficiaries will receive after you pass away.
If you are shopping for life insurance, finding a policy with a death benefit for your loved ones is incredibly important. You can find and compare life insurance quotes online from multiple companies with a variety of face value options.
You can use our free quote tool above to compare rates today and see how much you can expect to pay in life insurance rates.
What is face amount in insurance?
The face amount or face value of life insurance is the same as the death benefit of a policy. So, if you’ve ever wondered which is better when it comes to face amount vs. death benefit, the truth is, they’re exactly the same.
The face amount is simply the money the policy owner’s beneficiaries will receive whenever the policy owner passes away.
With regard to the life insurance face amount vs. cash value of a policy, the cash value is the amount you would receive if you surrendered your life insurance policy early. If you receive a cash value from your life insurance policy, you’re likely not going to receive a death benefit.
Most policyholders try to keep a life insurance policy for the duration of their lives rather than using the cash value. But some people need to take advantage of their policy’s cash value if they need financial help with medical debt or some other type of emergency.
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How do you calculate the face value of life insurance?
There are a few ways you can calculate the face value of your life insurance policy. If you can locate your schedule of benefits — which is given to you when you buy life insurance — you will see a summary of the benefits your beneficiaries will receive when you die.
You should start with your death benefit amount. If you have any riders on your policy, add those benefits to your death benefit. The table below shows some common riders associated with different life insurance policies. All of these can impact the face value of your policy over time.
Common Life Insurance Riders that Affect Face Value
| Rider | Description |
|---|---|
| Accidental death benefit | Pays a benefit in addition to the death benefit of the policy if the insured dies as a result of qualifying accidental injuries |
| Terminal illness | Gives early access to a percentage of the death benefit if diagnosed by a physician as having 12 months or fewer to live |
| Child | Pays a death benefit to the insured parent upon the death of an eligible child |
| Spouse | Pays a death benefit to the insured person upon the death of an eligible spouse |
| Waiver of premium | Waives the policy premiums if the insured becomes completely disabled |
| Disability income | Pays a monthly income of 1 – 2% of the face value if the insured becomes disabled |
| Guaranteed insurability | Guarantees you the right to buy additional insurance, without proof of good health, at specified dates in the future |
| Return of premium | The insurer will return your premiums at the end of the term, minus the additional cost of the rider |
Once you’ve added these numbers, check the cash value of your policy to see if it has accumulated and can be added to your death benefit. This will vary from one policy to the next, so it’s important to familiarize yourself only with the policy you signed up for.
Before you finish, you will need to subtract any loans you have taken out on your policy. The final number you see will be the current face value of your policy.
Do different insurance types have different face values?
The type of insurance you purchased will certainly impact the face value of your policy. A term policy, for example, does not offer the option of accumulating cash value. Because of this, the face value of your term life insurance policy will be the stated death benefit of your policy, plus any riders you have added to your policy.
A whole life insurance policy, however, can be more difficult to understand when it comes to face value and cash value. The face value of a whole life policy has the likelihood of changing over time. Because of this, it’s a good idea to calculate your death benefit at least once a year to know your current face value.
If you’re wondering what type of life insurance you need or trying to figure out exactly what death benefit you want, it may benefit you to do some additional research on policies and death benefits.
Before you buy life insurance, be sure to understand the nature and benefits of your policy, both for yourself and your beneficiaries. If you have a group policy available through your employer, this can sometimes be a great way to save money on life insurance. But you should always compare rates from multiple companies to make sure you’re not overpaying for coverage.
You can use our free quote tool below to get started in your search for life insurance today.
Case Studies: Utilizing Different Types of Life Insurance Face Values
Case Study 1: Term Life Insurance Face Value for Temporary Protection
John, a 30-year-old individual, purchases a term life insurance policy with a face value of $500,000. His main objective is to provide financial protection for his family in case of his premature death. As the primary breadwinner, John wants to ensure that his spouse and children will have enough funds to cover expenses such as mortgage payments, education costs, and daily living expenses.
The face value of his term life insurance policy provides the necessary financial support during the policy term, which aligns with the period when his dependents are most financially vulnerable.
Case Study 2: Whole Life Insurance Face Value for Long-Term Legacy Planning
Mary, a 45-year-old individual, opts for a whole life insurance policy with a face value of $1 million. She intends to create a long-term financial legacy for her children and grandchildren. By choosing a whole life insurance policy, Mary ensures that her beneficiaries will receive the face value of $1 million upon her death, regardless of when that occurs.
The face value provides a substantial inheritance, allowing her beneficiaries to achieve financial security, pursue educational opportunities, or invest in their own futures.
Case Study 3: Universal Life Insurance Face Value for Flexible Coverage
David, a 50-year-old individual, selects a universal life insurance policy with a face value of $2 million. He desires flexibility in his life insurance coverage and wants to have the option to adjust the face value as his financial circumstances change. With a universal life insurance policy, David can modify the face value over time to align with his evolving needs.
This provides him with the ability to increase or decrease the death benefit based on factors such as changes in financial obligations, estate planning goals, or anticipated future expenses.
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Frequently Asked Questions
Is the face value of a life insurance policy taxable?
Generally, the face value is not taxable for beneficiaries, but exceptions may apply based on assigned policies or estate taxes. Consult a tax professional for specific circumstances.
What happens if the face value of a life insurance policy is not claimed?
Unclaimed face value may remain with the insurer and could be turned over to the state as unclaimed property after a certain period.
Can the face value of a life insurance policy be decreased?
Normally, the face value cannot be decreased unless requested by the policy owner or due to outstanding loans or unpaid premiums.
Can the face value of a life insurance policy be increased?
Yes, through policy riders, the face value can be increased by adding additional coverage to the policy.
Can the face value of a life insurance policy change over time?
The face value of term life insurance remains constant, but with permanent policies, it can increase through cash value accumulation or additions.
What is the difference between face value and cash value in life insurance?
Face value is the coverage amount paid to beneficiaries upon the insured’s death, while cash value is the accumulated value in a permanent policy that can be accessed by the policy owner.
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Kalyn Johnson
Insurance Claims Support & Sr. Adjuster
Kalyn grew up in an insurance family with a grandfather, aunt, and uncle leading successful careers as insurance agents. She soon found she has similar interests and followed in their footsteps. After spending about ten years working in the insurance industry as both an appraiser dispatcher and a senior property claims adjuster, she decided to combine her years of insurance experience with another...
Insurance Claims Support & Sr. Adjuster
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance related. We update our site regularly, and all content is reviewed by life insurance experts.