What Is Face Value?

The face value of a life insurance policy is the amount that your heirs would receive if you die while insured. You pick a death benefit to set the policy's original face value when you sign up for coverage. However, the face value and future payout could increase or decrease over time, depending on how you manage the policy. Here's how this works.

Understanding Face Value

The initial face value is the amount of death benefit purchased when the policy is issued. The original face value (or face amount) will be stated on the policy itself. In the event of the insured's death, this is the amount paid to the 澳洲幸运5官方开奖结果体彩网:policy's beneficiaries. Any scheduled future changes can be found in the policy's 澳洲幸运5官方开奖结果体彩网:illustration table or benefits schedule.

The face value for most澳洲幸运5官方开奖结果体彩网:term insurance policies remains the same until the policy terminates. However, the face value for a 澳洲幸运5官方开奖结果体彩网:permanent life insurance policy may change as the policy matures. For example, the face value can go up if you buy additional insurance (known as 澳洲幸运5官方开奖结果体彩网:paid-up additions or PUA) or allow dividends to accumulate within the policy. Withdrawals of cash from the policy, on the other hand, will reduce the face value and payout for your heirs. Policy loans from the cash value will also reduce the face amount if they are not repaid before you die.

How to Determine Face Value

To calculate the full benefit that will be paid out to beneficiaries in the event of the insured person's death, start by checking your policy's most recent statement. You should also check whether your policy contract has any riders, which are additional benefits that can be included in a plan. For example, some riders stipulate that the face value doubles if you die from a specific type of accident.

As your policy ages and more transactions occur, it can become challenging to determine the exact value of your policy on yourཧ own. Consult your insurance agent for assistance in determining the precise face amount. Your agent can also help you understand the pros and cons of various options if you need to withdraw cash from your perman♛ent life policy.

Face Value vs. Cash Value

The face value is the amount your heirs would receive after you die. 澳洲幸运5官方开奖结果体彩网:Cash value is the amount of money that has accumulated within the policy that you can withdraw or borrow while alive. Cash value will be le♎ss than the face value and death benefit of your policy.

澳洲幸运5官方开奖结果体彩网:Cash surrender value refers to the amount of money you would receive if you stop paying premiums, terminate the coverage, and exchange the policy for cash. The surrender value equals the cash value minus any charges the insurance company levies for early termination, as well as any outstanding loans and loan interest.

How Face Value Influences Cost

Face value is one of the most important factors cꦚontributin🀅g to the cost of a life insurance policy. For example, a term life insurance policy with a $100,000 face value will have lower premiums than one with a face value of $500,000.

Meanwhile, because permanent policies have both a face value and a cash value—and because they last your whole lifetime— their premiums will be much higher than 澳洲幸运5官方开奖结果体彩网:term life policies with the same face value. You'll pay significantly more for a 澳洲幸运5官方开奖结果体彩网:whole life insurance policy with a $500,000 face value than you would for a term life policy with a $5🔜00,000 face value.𒁃

Premiums are lower for term policies because you are paying for temporary coverage that accumulates no cash value. Permanent insurance is priced higher to cover the cost of insurance across your lifetime, plus your contributions to the policy cash value. Adding riders that increase your face value (such as cost of living increase riders that raise your death benefit to keep pace with inflation, or 澳洲幸运5官方开奖结果体彩网:guaranteed insurability riders) will also increase your costs.

What Can Cause Face Value to Change?

There are many events that can trigger an increas♏e or decreasꦗe in the face value of a policy.

On the positive side, the cash value can grow large enough tha꧑t it actually causes a corresponding increase in the face value of the policy. This can result from dividends that are credited to the policy, which increases the totaಌl cash value. Policy owners may also be able to purchase additional insurance (PUA) within the same policy by adding cash or using dividends to increase the face value.

On the minus side, unpaid policy loans taken from the cash value will be deducted from your policy's face value. If you fail to pay your premiums, the insurance company may begin using the cash value in the policy to cover these payments, reducing both the cash value and the future face value. Finally, if you withdraw cash from the policy, it will reduce the face value.

The Bottom Line

You should track the face value of your policy so you know you much your loved ones will receive after you pass away. This calculation can be tricky on policies with rider benefits as well as those with cash value. You can track the face value yourself using your policy statements, but if you're unsure, contact your insurance agent to get the most up-to-date figure.