What does the term "face value" refer to in life insurance?

The term "face value" in life insurance refers to the amount of money that the insurer agrees to pay to the beneficiary upon the death of the insured. This is essentially the death benefit specified in the policy, and it represents the core purpose of the life insurance contract, which is to provide financial protection to the insured's beneficiaries in the event of their death.

When a policy is issued, the face value is clearly stated in the policy document, and it does not change over the life of a term policy. In permanent policies, aspects like cash value may accumulate over time, but the face value remains the same unless the policyholder makes changes, such as increasing coverage or adjusting riders.

Understanding the face value is vital for policyholders as it directly correlates to the financial security provided to loved ones; it defines how much money will be available to them when a claim is made after the death of the insured.