Face value is the coverage amount listed on your life insurance policy. It determines your premiums and represents the baseline payout to your beneficiaries.
Updated: February 23, 2026
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Term life insurance has constant coverage throughout the policy term, while permanent policies can increase or decrease based on your actions.
The actual amount paid out to your beneficiaries (the death benefit) can differ from the life insurance face value due to policy loans, riders and withdrawals.
Calculate the right face value using 10 to 15 times your annual income, plus outstanding debts, the mortgage balance, and future education costs for dependents.
Face value is the coverage amount stated on your life insurance policy. For a $500,000 term life policy, the face value is $500,000. This number appears on your policy documents, determines your monthly or annual premium costs and serves as the baseline for what your beneficiaries receive.
The coverage amount you choose depends on your income replacement needs, outstanding debts and financial obligations. Insurers evaluate your eligibility based on age, income and existing coverage amounts.
Life insurance policies use several dollar amounts that sound similar but mean different things. Here's what each one means:
These terms are interchangeable. Both refer to the policy's stated coverage amount listed on your benefits schedule and policy documents. When you see "$250,000 face value" on your paperwork, you have $250,000 in coverage. Insurance companies, agents and policy documents use these terms identically.
The face value of life insurance is the coverage amount printed on your policy. The death benefit is the actual dollar amount your beneficiaries receive when you die. They start the same but the death benefit can change:
When the death benefit equals the coverage amount:
When the death benefit differs from the coverage amount:
Cash value is a separate savings component you can access while living through withdrawals or loans. Only permanent life insurance policies, such as whole life and universal life, build cash value. Term life insurance has no cash value component.
When you withdraw cash value, your policy's stated coverage amount decreases permanently. When you borrow against cash value, the loan plus interest reduces what beneficiaries receive, but the stated coverage amount stays the same.
Cash surrender value equals the amount you receive if you cancel your life insurance policy. This equals cash value minus surrender charges and fees imposed by the insurer. Terminating the policy eliminates all coverage, leaving your beneficiaries with no payout. Surrender charges typically decrease over 10 to 15 years from policy purchase and eventually disappear on many policies after the surrender period ends.
Your life insurance policy's face value appears on the declarations page, benefits schedule or policy summary sent annually by your insurer. Look for terms like "death benefit," "face amount" or "coverage amount" followed by a dollar figure. Contact your agent or insurer's customer service line if you can't locate this information. Most insurers also display the amount in online account portals.
The face value of a life insurance policy determines the monthly or annual premiums. Higher amounts cost more because the insurer's potential payout is larger. Your age, health status and policy type also affect premium costs, but the coverage amount remains the primary cost determinant.
Term life insurance usually maintains constant coverage throughout the policy term. A $750,000 30-year term policy provides $750,000 in coverage from day one through year 30. The amount doesn't change unless you add specific riders.
Permanent life insurance coverage can increase or decrease based on policy activity. These policies build cash value over time, which you can borrow against or withdraw. Taking a $30,000 cash value withdrawal permanently reduces a $600,000 policy to $570,000.
Adding paid-up additions or accumulating dividends increases coverage. Policy loans don't reduce the stated face value, but lower what beneficiaries receive by the outstanding loan amount plus interest.
Accelerated death benefit riders allow early payout for terminal illness, chronic illness or critical care needs. Each payment reduces the remaining death benefit available to beneficiaries.
Accidental death and dismemberment riders can double or triple the payout for deaths resulting from covered accidents. Long-term care riders pay benefits for nursing home or home health care, with each monthly payment reducing the total benefit.
Child riders add separate coverage for children without changing the primary policy's benefit. Waiver of premium riders maintain coverage by waiving premium payments during disability periods.
Calculating the right coverage amount requires analyzing your income replacement needs, outstanding debts and future financial obligations. A good rule of thumb is 10 to 15 times your annual income as a baseline, then adjust for your situation.
The DIME method provides a structured approach to calculating coverage:
A household earning $80,000 annually with $200,000 in mortgage debt, $50,000 in other debts, and two children who need $100,000 each for college requires at least $1.25 million in coverage.
Review coverage every three to five years or after major life events. Marriage, birth or adoption of children, home purchase and income changes may require changes. Divorce or children becoming financially independent may allow for reductions in the coverage amount.
Term life options for increasing coverage typically require buying a new policy or converting to permanent insurance. Permanent life policies allow additions through paid-up additions or guaranteed insurability riders. Some policies permit reductions without canceling the entire policy.
The face value of a life insurance policy is the coverage amount stated. It's the baseline amount for beneficiary payouts. The actual payout can differ from this amount due to policy loans, cash value withdrawals and riders.
To calculate adequate coverage, multiply your annual income by 10 to 15, then add outstanding debts, mortgage balance and education costs for dependents. Review your coverage every few years to confirm it still meets your family's needs as your financial situation changes. Contact your agent or check your policy's benefits schedule to verify your current coverage amount.
Yes. Accidental death riders double or triple the base coverage amount for deaths from covered accidents. Return of premium riders add all paid premiums to the payout. Accumulated dividends from participating whole life policies also increase what beneficiaries receive. Interest earned on delayed payments increases the final amount.
Term life policies lapse and remove all coverage when you miss premium payments. Permanent life policies with cash value allow the insurer to use cash value to pay premiums, which reduces coverage over time, or convert to reduced paid-up insurance with lower coverage and no more premium payments.
Yes. Face value is the primary determinant of life insurance premiums. Increasing the coverage amount increases premiums because of the proportional relationship between coverage and risk. Age, health status, policy type, riders and term length also affect costs, but the coverage amount remains the largest pricing factor.
About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. He has analyzed the insurance market for over five years, conducting original research for insurance shoppers. His insights have been featured in CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
He writes about economics and insurance, breaking down complex topics so people know what they're buying.
