What is Face Value of Life Insurance?

This article has everything you need to know about what is face value of life insurance.

Life insurance face amount vs cash value

Face value and cash value are two different numbers that together form part of a life insurance policy. The face value of a life insurance policy is the death benefit, while its cash value is the amount that would be paid if the policyholder opts to surrender the policy early.

Face value can be found in the statement of benefits, while cash value is on the monthly statement policyholders receive.

Face amount life insurance

The face value is also known as the death benefit. Face value is the amount that the insured’s family or beneficiaries receive upon death of the policy owner. In most cases, the face value is transferred to the beneficiaries tax-free. A policy’s face value can be supplemented by additional benefits that have been added beyond the basic plan coverage. Face value is different from cash value.

Face value is the primary factor in determining the monthly premiums that will be owed.

Cash Value

Cash value, often referred to as the surrender value, is the amount paid to the insured if he/she surrenders the policy early. They, however, lose the chance of receiving any death benefit by receiving the cash value. Cash value is recorded on the monthly statements that insurance companies send to their clients.

Face amount vs death benefit

Face value of the life insurance policy is the same as the death benefit. It is the primary factor in determining the monthly premiums that will be owed.

Face value calculator

Face value is paid as a death benefit to the beneficiaries at the event of policy owner’s death, so to calculate that schedule of benefits in the policy is referred.

Riders are the additional benefits that are added in a plan, and are offered by most insurance carriers.  For instance, addition of a policy that implies doubling of the face value if the policy owner loses their life at the hands of a specific type of accident

Moreover, the death benefit comprises face value as well as any additional benefits in the policy. In most cases, the face value of life insurance is transferred to the beneficiaries without any tax deduction (tax free).

Determine the face value of a life insurance policy

Face value is one of the most important factors that contribute to the cost of a life insurance policy.

The key thing is to determine how big a face value to buy. And to do so, start off by asking yourself these questions:

  • How much money will be sufficient for my spouse and children to maintain their current quality of life?
  • How much will they need to pay my debts, taxes, and other estate-related costs?
  • How much will my favorite charities need to replace my donations?
  • Next, figure out the maximum length of time the coverage would be needed. For example, if your youngest child is two years old now, you’d want to make sure he or she has a sufficient income through college. That’s another 20 years.

To determine the full benefit that is paid out to beneficiaries in the event of the insured’s death, consult the schedule of benefits in the policy. Most life insurance companies also offer riders, which are additional benefits that can be purchased on a plan. For example, some riders stipulate that the face value doubles if the insured dies because of a specific type of accident. All together, the face value plus additional benefits are what constitute the policy’s total death benefit.

Understanding the Impact of Face Value on Life Insurance Cost

Face value is one of the most important factors that influence the cost of a life insurance policy. A 25-year old woman trying to buy a term life insurance policy from Company XYZ would expect to pay more for a $500,000 face value policy than a $100,000 face value policy, for example. The face value is the amount that the insurance company is on the hook for should the woman die during the course of the term.

There are many different events that can trigger a change in face value for a policy. In some policies, cash value can potentially grow large enough that it actually causes corresponding increases in face value. Unpaid loans from an insurance policy can be deducted from the policy’s face value. Sometimes, a reduced face value can be paid out in the event of serious injury to the insured. Any potential change in face value is addressed in the policy itself.

It may be more cost-effective to use several policies of different face amounts and guarantee periods to cover these various needs. Or, it may be simpler to have one big fat policy to cover everything.


Understanding the face value of life insurance is crucial for making informed decisions about your policy. Face value, or the death benefit, directly impacts your premiums and ensures your beneficiaries receive financial support. It differs from cash value, which you can access if you surrender the policy early but lose the death benefit.

When determining the appropriate face value, consider your family’s future financial needs, debts, and how long the coverage should last. Reviewing your policy’s schedule of benefits and exploring additional riders can help maximize the death benefit for your beneficiaries.

Face value adjustments can occur due to unpaid loans or policy growth. To cover various needs, you might find it more cost-effective to use multiple policies with different face values and terms. However, some prefer the simplicity of one comprehensive policy.

By carefully selecting and managing your life insurance face value, you can ensure your loved ones are financially secure.

John Otero

John Otero

John Otero is an industry practitioner with more than 15 years of experience in the insurance industry. He has held various senior management roles both in the insurance companies and insurance brokers during this span of time. He began his insurance career in 2004 as an office assistant at an agency in her hometown of Duluth, MN. He got licensed as a producer while working at that agency and progressed to serve as an office manager. Working in the agency is how he fell in love with the industry. He saw firsthand the good that insurance consumers experienced by having the proper protection. John has diverse experience in corporate & consumer insurance services, across a range of vocations. His specialties include Major Corporate risk management and insurance programs, and Financial Lines He has been instrumental in making his firm as one of the leading organizations in the country in generating sustainable rapid growth of the company while maintaining service excellence to clients.