How To Determine the Face Value of a Life Insurance Policy
May 11, 2023
Face value life insurance offers various options and benefits when considering your insurance policy. Choosing among life insurance options is a challenging task. With all the different types of policies and riders to add, it cannot be easy to understand what is best for your loved ones.
How Death Benefits Relate to Face Value
Some insurance agents refer to the face value of a life insurance policy as the death benefit. It is because both terms refer to the sum of money your beneficiaries will likely receive when you die.
If you are not sure whether the death benefit of your current policy will be sufficient, consider the following expenses that it must pay for:
- Outstanding debts
- Funeral expenses
- Family support to replace your salary for at least 10 years
- Mortgage payments
- College tuition for children
How Face Value Differs From Cash Value
Whether your policy has a face and a cash value, all depends on the type of insurance. If you have term life insurance, your policy has only a face value. Policyholders cannot use term insurance as a savings account because the benefits only go to the beneficiaries after death.
Whole-life policies, on the other hand, have both face and cash values. This form of insurance is usually more expensive, but the owner earns interest on the policy's value. Policyholders can also remove funds or even borrow from them. After death, the face value depends on how much remains in the policy, how much interest it earned, and whether any outstanding loans exist.
How Face Value Affects Monthly Premiums
When considering your life insurance strategy, one aspect to consider is whether you can afford the monthly premiums. Everyone wants to provide for their families after they are gone. However, they must balance this goal with paying bills.
The amount of money the insurance company promises to pay after your death is the primary driver of your monthly costs. For example, the monthly premium for a face value of $100,000 is less than a death benefit of two million .
How To Find the Face Value of a Life Insurance Policy
To begin to understand how much money your loved ones will receive when you are gone, consult the schedule of benefits in your policy. You should also consult the illustration table, which projects future changes to the value.
Check whether your policy has riders that might add to or subtract from the death benefit. The following are examples of potential riders that would raise the amount of money a family receives:
- Accidental death
- Family income benefit
- Return of premium
Necessary Investment
Life insurance is a valuable investment, depending on your goals and financial situation. Whichever plan you choose, you will gain peace of mind just knowing that your life insurance will provide enough for your loved ones when you pass away.
About 1891 Financial Life
At 1891 Financial Life we don’t just sell policies, we offer possibilities. We pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs.
Our portfolio is extensive, ranging from various life insurance policies to our annuities to support your financial needs no matter what stage of life you’re in.