What You Should Know
- There is no difference between life insurance face value and life insurance death benefits
- The face value of your policy will impact your monthly life insurance rates
- Term life and whole life insurance both have a face value, but only whole policies accrue cash value
Life insurance provides varying amounts of life insurance death benefits depending on the coverage and company you choose. This is known as the life insurance face value.
There is no difference between face value and death benefits, and many life insurance companies use these terms interchangeably when determining your rates. The higher your face value, the higher your rates, but you can find $500,000 life insurance coverage for $25 monthly.
Keep reading to learn how to calculate life insurance face value and determine the right amount of coverage for you.
The Face Value of Life Insurance
Life insurance face value refers to the death benefit plus any additional riders. To understand the face amount in life insurance, first find out how life insurance works — you pick a benefit amount when you buy coverage, and how much you choose will impact your life insurance rates:
Life Insurance Face Value Average Premiums
| Face Value | Monthly Rates |
|---|---|
| $100,000 | $10 |
| $250,000 | $15 |
| $500,000 | $25 |
| $750,000 | $34 |
| $1,000,000 | $42 |
| $2,000,000 | $77 |
You can add life insurance riders, which can increase the benefit amount and, therefore, the face value of the policy. It will also increase your rates, so shop around with multiple companies to find the right price for your budget.
The Difference Between Life Insurance Face Value and Death Benefits
There is no difference between face value and death benefits when it comes to life insurance, so don’t be intimidated by companies or agents who use one or both of these terms.
Just remember that life insurance face value is the amount of death benefits you chose for your policy. Take advantage of our term life insurance calculator to determine the right face value for your coverage.
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Determining the Face Value of an Insurance Policy
Most life insurance payouts are ten times the policyholder’s annual income. So if you earn $50,000, a $500,000 life insurance policy should provide enough coverage.
Consider the type of life insurance you need based on your budget, as both policy type and face value affect your rates:
Life Insurance Face Value: Types of Policies and Average Premiums
| Type of Life Insurance Policy | Face Value Range | Monthly Rates |
|---|---|---|
| Term Life Insurance | $50,000 – $500,000 | $10 – $50 |
| Whole Life Insurance | $50,000 – $250,000 | $50 – $200 |
| Universal Life Insurance | $100,000 – $250,000 | $50 – $150 |
| Variable Life Insurance | $100,000 – $250,000 | $100 – $250 |
Use our guide to compare different types of life insurance before you buy to get the best coverage.
The Face Value of a Life Insurance Policy Can Change
We stated earlier that riders can increase life insurance face value, but the face value can also change due to:
- Fraud: Lying on your life insurance application, such as omitting dangerous hobbies, can cost your beneficiaries and reduce the face value to nothing.
- Investments: Whole life insurance accrues cash value, increasing the policy’s worth but not affecting face value. Beneficiaries don’t receive a bigger benefit, but policyholders can borrow against the invested cash value.
- Loans: With whole life insurance, you can borrow against the cash value of the policy. However, if you fail to pay back the loan before you pass, the insurer will deduct the amount owed from the death benefits, reducing the face value of the policy.
Some changes only affect permanent life insurance since these policies are the only ones to offer investment opportunities, loans, and cash value growth. The face value of term life insurance rarely changes since the policy doesn’t generate cash value.
Term Life Insurance Face Value vs. Whole Life Insurance Face Value
Both term life and whole life insurance have face value based on the death benefit amount, but term life does not accrue cash value. Explore other differences between these policies:
Term vs Whole Life Insurance: Key Differences
| Term Life Insurance | Whole Life Insurance |
|---|---|
| Set number of years, typically between 10-20 | For life |
| Cheaper rates | More expensive rates |
| No savings vehicle | Savings vehicle/ cash value |
| Can add riders | Can add riders |
Life insurance face value will impact both term and whole life insurance rates, but whole life is more expensive since coverage lasts longer and generates cash value.
How Life Insurance Face Value Differs From Cash Value
The biggest difference between life insurance face value vs. cash value is that you cannot withdraw from life insurance face value.
What is cash value life insurance? Cash value policies are a type of whole life insurance where a portion of your annual premiums is invested in the stock market. It acts like a life insurance savings account that can cover future life insurance payments.
Can life insurance be cashed out? Whole life insurance can be cashed out for the cash value when you surrender the policy. You will receive the life insurance cash value minus any debts, but you will lose the face value, and your beneficiaries will receive nothing.
Consider the differences between cash value vs. surrender value before you decide to cancel life insurance.
Understanding Life Insurance Face Value
Life insurance face value is the death benefit amount you leave behind, so pick your beneficiary wisely. Follow our guide on how to choose a life insurance beneficiary to maximize the face amount of your policy to meet the needs of your loved ones.
To determine life insurance face value, multiply your annual income by ten and consider adding life insurance riders based on your unique lifestyle. The face value will influence your rates, so compare life insurance quotes online to find the most affordable policy near you.
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Frequently Asked Questions
How much is my life insurance policy worth?
Your life insurance policy is worth the total of your death benefit plus any additional rider coverage you have.
What is face value in life insurance?
Life insurance face value refers to the death benefit amount you chose at purchase.
Can life insurance face value change over time?
If you have whole life insurance and borrow against the cash value, the life insurance face value can change if you fail to repay the loans.
How do I choose the right life insurance face value?
Multiply your annual income by ten to determine the right life insurance face value for your policy.
What is life insurance face value vs. cash value?
Life insurance face value refers to the policy death benefits, while life insurance cash value is an additional amount earned by investing a percentage of your life insurance rates.
Can I withdraw face value from life insurance?
No, you cannot withdraw from life insurance death benefits, only from the cash value component of whole life insurance.
What is the cash value of a $25,000 life insurance policy?
Life insurance cash value varies based on your insurance rates and market performance. The common rate of return is between 1%-3% of your annual premiums.
Is life insurance face value taxable?
Life insurance face value is not taxable as long as your beneficiaries receive the death benefits in one lump sum.
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Tim Bain
Founder & Life Insurance Agent
Tim Bain is a licensed life insurance agent with 23 years of experience helping people protect their families and businesses with term life insurance.
His insurance expertise has been featured in several publications, including Investopedia and eFinancial. He also does digital marking and analysis for KPS/3, a communications and marking firm located in Nevada.
Founder & Life Insurance Agent
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