The stated benefit of a term life insurance, or the face value, is one of the most important aspects of the policy. The face value is the amount that will be paid out to the beneficiaries after the death of the policyholder. Compared to other life insurance plans, the face value of a term life insurance is fairly simple, but there are always a few things to consider.
What is the exact amount that will be paid out? It is easy to assume that the face value of the policy is what will be paid out as the benefit, however the face value is the amount set at the beginning of the policy. The actual paid out amount can also decrease or increase over the life of the policy. Certain clauses, such as an age clause, can decrease the amount that will be paid out. Once the policyholder reaches a certain age, the age clause limits the benefits. This is a way for insurance companies to protect themselves from paying a large amount out once death becomes more likely later in the policy. The benefit to policies with this clause is they tend to be less expensive than those policies without them. Other policies, like a decreasing term life insurance policy, will just decrease until the policy actually expires.
In some cases, although they are not as common, the value of the benefit will increase. A double indemnity clause is an add on to a term life insurance policy which will cause a slight increase in rates, but will pay out twice the amount of the benefit should the policyholder's death be caused by an accident.
The policy rates and various clauses that are either excluded or included should be considered against the face value of a term life insurance policy to determine whether or not the policy is a good deal. Those agreements with affordable, fair premiums and high face value with few clauses that will restrict payouts are considered to be a good deal. Inexpensive term life insurance policies can be found that meet this criteria as long as policyholders read through their quotes carefully and compare rates.
What is the exact amount that will be paid out? It is easy to assume that the face value of the policy is what will be paid out as the benefit, however the face value is the amount set at the beginning of the policy. The actual paid out amount can also decrease or increase over the life of the policy. Certain clauses, such as an age clause, can decrease the amount that will be paid out. Once the policyholder reaches a certain age, the age clause limits the benefits. This is a way for insurance companies to protect themselves from paying a large amount out once death becomes more likely later in the policy. The benefit to policies with this clause is they tend to be less expensive than those policies without them. Other policies, like a decreasing term life insurance policy, will just decrease until the policy actually expires.
In some cases, although they are not as common, the value of the benefit will increase. A double indemnity clause is an add on to a term life insurance policy which will cause a slight increase in rates, but will pay out twice the amount of the benefit should the policyholder's death be caused by an accident.
The policy rates and various clauses that are either excluded or included should be considered against the face value of a term life insurance policy to determine whether or not the policy is a good deal. Those agreements with affordable, fair premiums and high face value with few clauses that will restrict payouts are considered to be a good deal. Inexpensive term life insurance policies can be found that meet this criteria as long as policyholders read through their quotes carefully and compare rates.
