In a life insurance policy, the face amount is best described as

• A. The cash value
• B. The annual premium due
• C. The policy loan limit
• D. The death benefit amount guaranteed by the policy

Answer: (D)

Face amount is the amount stated on a life insurance policy that will be paid as the death benefit to beneficiaries when the insured dies. This is the basic coverage the policy provides, assuming the policy remains in force. It is distinct from the cash value, which is a savings component in permanent policies that can grow over time and sometimes be borrowed against. It is also separate from the annual premium, which is the cost to keep the policy active. The policy loan limit refers to how much you can borrow against any cash value, not the amount paid out at death. In short, the face amount is the guaranteed death benefit the policy promises to pay.