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Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: Jose Luis Pelaez Inc/Getty Images March 01, 2021 Kacie Goff is a personal finance and insurance writer with over seven years of experience covering personal and commercial coverage options. She writes for Bankrate, The Simple Dollar, NextAdvisor, Varo Money, Coverage, Best Credit Cards and more. She's covered a broad range of policy types — including less-talked-about coverages like wrap insurance and E&O — and she specializes in auto, homeowners and life insurance. Bankrate logo The Bankrate promise
At Bankrate, we strive to help you make smarter financial decisions. To help readers understand how insurance affects their finances, we have licensed insurance professionals on staff who have spent a combined 47 years in the auto, home and life insurance industries. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation of how we make money. Our content is backed by LLC, a licensed entity (NPN: 19966249). For more information, please see our Insurance Disclosure. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our insurance team is composed of agents, data analysts, and customers like you. They focus on the points consumers care about most — price, customer service, policy features and savings opportunities — so you can feel confident about which provider is right for you. We guide you throughout your search and help you understand your coverage options. We provide up-to-date, reliable market information to help you make confident decisions. We reduce industry jargon so you get the clearest form of information possible. All providers discussed on our site are vetted based on the value they provide. And we constantly review our criteria to ensure we’re putting accuracy first. Bankrate logo Editorial integrity
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Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in . Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way. When you’re buying life insurance, you might feel like you need a glossary just to even start the process. Even the use industry lingo that can make buying a policy feel overly confusing. This advertising widget is powered by HomeInsurance.com, a licensed insurance producer (NPN: 8781838) and a corporate affiliate of Bankrate. The offers and clickable links that appear on this advertisement are from companies that compensate Homeinsurance.com LLC in different ways. The compensation received and other factors, such as your location, may impact what ads and links appear, and how, where, and in what order they appear. While we seek to provide a wide range of offers, we do not include every product or service that may be available to you as a consumer. We strive to keep our information accurate and up-to-date, but some information may not be current. Your actual offer terms from an advertiser may be different than the offer terms on this widget. All offers may be subject to additional terms and conditions of the advertiser. Compare life insurance providers quickly and easily
See which provider is right for you. The amount of coverage you need depends on many factors, including your age, income, mortgage and other debts and anticipated funeral expenses. Whole life insurance combines life insurance with an investment component. Coverage for life Tax-deferred savings benefit if premiums are paid 3 variations of permanent insurance: whole life, universal life and variable life include investment component Term life insurance is precisely what the name implies: an insurance policy that is good for a specific term of time. Fixed premium over term No savings benefits Outliving policy or policy cancellation results in no money back Find matches Powered by HomeInsurance.com (NPN: 8781838) This advertising widget is powered by HomeInsurance.com, a licensed insurance producer (NPN: 8781838) and a corporate affiliate of Bankrate. HomeInsurance.com LLC services are only available in states where it is licensed and insurance coverage through HomeInsurance.com may not be available in all states. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way. Bankrate Why Lemonade? It's a fresh twist on life insurance: easy, accessible and affordable. See more providers in Choose from insurers in Show More As you’re shopping for coverage, for example, you might be wondering, what is the face amount of life insurance? Also called face value, the face amount of your insurance policy is arguably the most important component of your coverage. So it’s pretty critical that you understand what face value means, and can differentiate between face amount vs. cash value. What is the face value of a life insurance policy
In short, your face value is the amount of money your beneficiaries will receive from your insurance company at the time of your death. You might hear it called your death benefit, coverage amount or face amount. So when you buy life insurance, this is what you’re paying for. So what is the face amount of the life insurance policy you have? If you haven’t used any of your cash value (more on that in a minute), you don’t need to do any calculations to find out. Your policy benefits should list your face value as a specific sum. If you’re not sure about the face amount of your policy, read it through. The face value should be easy to find, but if you have any trouble, call your insurer. If you’re paying for a life insurance policy, you definitely want to know the amount of money your loved ones will get when you pass away. Cash value
We mentioned that using your policy’s cash value can impact your face value. The life insurance face value vs. cash value conversation can feel a little confusing, especially since these two policy components are so similarly named. But you should know that these are two separate things. Let’s look at the face amount vs. cash value. The face value/face amount is, as we’ve said, your death benefit. It’s the amount of money you picked for your beneficiaries to get when you bought your policy. It’s (generally) a fixed number. If you bought a permanent life insurance policy, your coverage may also come with . This is completely separate from your face value. When you pay your premiums, your insurance provider puts some of that money into a separate account for you. That money might earn a steady rate of interest or get invested, depending on the type of policy you chose. Your cash value can be useful to you in a few ways, including: Premium payment: If that cash value gets big enough, you can usually use it to pay your life insurance premiums. Loan collateral: At a certain point (e.g., after a set number of years), you might be able to borrow against your cash value. You’ll usually get a low interest rate with this loan, but you’ll need to pay it back before you pass away or your insurer will deduct the outstanding loan amount from your face value. Surrender value: If you choose to surrender your life insurance policy, you can get the cash value back as a lump sum. You’ll lose your face value, though, leaving your loved ones without this benefit when you pass away. What should my face value be
Now that you know the difference between the face value and cash value of your life insurance policy, you’re ready to make an informed decision about the right face value for you. You might think you want to get a policy with a huge face value, but you should know that the higher your policy’s face amount, the . So, really, picking the right face value comes down to balancing your loved ones’ future needs against your budget right now. Plus, insurers will generally cap your face value at a certain amount based on things like your age and your salary. A 20- or 30-year-old might be able to get a policy with a face value that’s roughly 50 times their salary right now, for example, while a 60-year-old might only be able to get a face amount worth ten times their current salary. That’s because insurers assume younger people will live longer, meaning the insurance company can make more money off their premiums to cover that face amount. Ultimately, the right face value for you will depend on things like: How many dependents you have Your salary Whether or not you want to pay for your kids’ college, if you have children Your outstanding debts, like a mortgage To help you figure out the right level of face amount insurance coverage for your needs, we have a and a . What causes face value to change
Generally, your policy’s face amount doesn’t change. You pick that number when you buy your policy and it stays at that level until you pass away, at which point your beneficiaries get that amount of money. In fact, that’s one of the key differentiators between life insurance face value vs. cash value. But that said, there are a few things that can alter your face amount, so let’s look at them. Using a rider
(also called an endorsement) is additional coverage you add to your life insurance policy. And some riders allow you to tap into your face value while you’re living. For example, you might choose to add a terminal illness rider. That way, if you’re diagnosed with a terminal illness, you can use some of your death benefit for medical care while you’re alive. But any money you use while you’re living will get subtracted from your face value amount, lessening the benefit your loved ones receive when you pass away. Cash value growth
Technically, this doesn’t affect your face value, but it does impact the overall worth of your policy, so it’s worth mentioning. As your cash value grows, you might feel like your policy is getting more valuable. But remember that there are major differences between the face value and the cash value. Specifically, it’s important to know that when you die, your insurance provider absorbs the remainder of your cash value unless you have a rider that specifically calls for it to get added to your death benefit (i.e., handed over to your beneficiaries). These riders are rare, so it’s best to assume cash value growth won’t affect your face amount insurance coverage. A policy loan
As we’ve mentioned before, if you have a policy with a cash value component, you can probably borrow against it for a low-interest loan. But if you don’t pay that money back, your insurance company will subtract your outstanding loan amount from your face value at the time of your death. Lying on your application or certain causes of death
When your insurer agrees to pay the face amount to your beneficiaries, they do so under the assumption that you will pass away as the result of an unforeseeable cause. If you lie on your application (e.g., you don’t disclose a preexisting condition) or you commit suicide, you violate the agreement with your insurer. At that point, they may void your policy — which effectively brings your face value down to zero, leaving your loved ones empty-handed. Frequently asked questions
How does face value influence my premiums
The higher your face amount, the higher your premiums. As you’re choosing the face amount of your life insurance policy, get quotes for premiums to make sure your budget can accommodate them. What is the best life insurance company
That depends. Your age, your family’s needs, your health and other factors impact your life insurance needs — and the best company to meet them. But some life insurance companies offer better products and services than others. To help you compare some of the leading providers, we’ve compiled a list of the . How do I increase the face amount of my life insurance policy
You can call your insurance provider and ask. In some cases — for example, if your salary has significantly increased since you bought your coverage — they may be willing to adjust your policy. But this might require an entirely new underwriting process, meaning you might need to get a medical exam again. And your premiums will go up, too. If your insurer won’t increase your face value and you want more coverage for your loved ones, you can also purchase a separate, additional life insurance policy. SHARE: Kacie Goff is a personal finance and insurance writer with over seven years of experience covering personal and commercial coverage options. She writes for Bankrate, The Simple Dollar, NextAdvisor, Varo Money, Coverage, Best Credit Cards and more. She's covered a broad range of policy types — including less-talked-about coverages like wrap insurance and E&O — and she specializes in auto, homeowners and life insurance. Related Articles