Face amount (also known as face value) is the dollar amount of something that it is equal to. An example of this is when you are selling your car at face amount, you are selling it for the dollar amount it is worth exactly (not over and not under the value)
Face Amount in Life Insurance
The face amount in life insurance is how much coverage your life policy has or in other words, how much life insurance money is given to the beneficiary following the premature demise of the policyholder.
In the world of life insurance, the face amount (or face value) is also known as the death benefit.
The amount of coverage you purchased for your life insurance policy equals the face amount of your life insurance policy. For instance, if you purchased $500,000 in life insurance coverage, then the face amount of your life insurance policy is exactly equal to $500,000. It is the amount that your beneficiaries will get in the event of your premature demise as long as your life insurance policy stays active.
How much should the face amount of your life insurance plan be?
The face amount of your life insurance policy should cover your family’s financial situation. Generally speaking, it is ten to fifteen times your annual income.
Factors that are the basis of the face amount of your life insurance policy include: debt, college tuition, daily expenses, medical bills, the cost of your funeral and the cost of raising your dependents.
Entitlement of Face Amount
In the process of life insurance underwriting, life insurers assess your life insurance application prior to granting you life coverage. The procedure includes authenticating that you are entitled for the face value of life insurance you are requesting for. This is done based on your income, assets, age and also the number of dependents you have.
For instance, if you are young, let’s say under 30 years old, some life insurers might allow you to have a life insurance policy with a face amount that is equal to 40 times your annual income. Meanwhile, if you are above 60 years old, then this figure may decrease to 10 times your income. As a matter of fact, the coverage amount (or face amount) you are entitled to relies on your particular life insurer you work with.