Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.

Face amount vs. cash value

Your beneficiaries receive one, and you can tap into the other

All life insurance policies have a face amount, which is also called the death benefit, this is the amount that’s paid to your beneficiaries after you die. But only permanent life insurance policies have cash value, which functions similar to a savings or investment account that you can use while you’re still alive.

Features of face amount vs. cash value

Face amountCash value
What it coversA death benefit amount paid to beneficiaries once the policyholder dies.An investment component that grows over time and can be used for anything, such as a retirement supplement
Who it’s forYour beneficiariesYou
Payout optionsSingle lump sum paymentYou can withdraw any amount of the cash value at any time. If the entire cash value is taken out, the policy will cancel

What is the face amount?

The face amount of a life insurance policy — also referred to as the death benefit — is the amount of money that is paid to your beneficiaries after you die.

How does the face amount work?

After you die, your beneficiaries receive the face amount of your policy in a single lump sum payment. If you purchase a $250,000 life insurance policy, they’ll receive $250,000. If you have more than one beneficiary, they receive the percentage of the face amount that you designate to them when you apply for the policy.

What is cash value?

Cash value is the savings or investment component of a permanent life insurance policy. The cash value grows over time and can be used while you’re still alive. If you don’t use your policy’s cash value, it’s not added onto your policy’s face amount. You can use your cash value for anything, such as supplementing your retirement, paying off debt or buying a car.

How does cash value work?

Each time you pay your premium, a large portion of it goes into your policy’s cash value component. What happens next depends on which type of permanent life insurance you have, since whole life policies, universal policies and variable policies all invest your cash value differently. Your cash value grows over time, and can be withdrawn at any time while you’re still alive.

Any cash value amount that you take out doesn’t have to be repaid to your policy, since it’s your money. However, the amount that you withdraw is deducted from your policy’s face amount unless you pay it back, this means your beneficiaries will receive less money after you die. And if you withdraw the entire cash value amount, your policy will be canceled and your beneficiaries won’t receive a death benefit.

How do the face amount and cash value affect each other?

You’ll be able to withdraw your cash value once it starts growing, which normally takes a few years after your policy starts. The cash value amount you withdraw is the amount that is deducted from your policy’s face amount. If you repay the amount that you withdrew, the face amount is restored to its original amount.

Withdrawing the entire cash value amount is an option if you no longer need the life insurance aspect of your policy, and don’t want to continue paying premiums. For example, if your children are now independent or you have enough savings to cover end-of-life expenses, you may not need the life insurance portion of your policy anymore. Pulling out all your cash value surrenders your policy but gives you access to cash to use however you wish.

How to choose between the face amount and cash value?

Life insurance termWhat it does
Face amountThe death benefit that’s on all life insurance policies, paid to your beneficiaries. A higher face amount will result in higher cash value growth.
Cash valueOnly on permanent policies but provides an extra source of cash later in life.

Compare life insurance policies

Name Product Issue age Minimum Coverage Maximum Coverage Term Lengths Medical Exam Required
Policygenius
18 - 85 years old
$50,000
$10,000,000
10, 15, 20, 25, 30 years
Depends on provider and policy
Compare 12+ top insurers side-by-side to get the best possible deal, and shop return of premium policies online.
JRC Life Insurance
18 - 85 years old
$5,000
$50,000,000
10, 15, 20, 25, 30, 35, 40 years to lifetime/age 121
May be required
Compare policies up to $10 million from 45+ top insurance companies with the click of a button.
Sproutt
18 - 60 years old
$50,000
$4,000,000
5, 10, 15, 20, 25 and 30 years
No
Compare 40+ insurers and apply online to get the lowest possible price — no medical exam required.
Fabric
21 - 60 years old
$100,000
$5,000,000
10, 15, or 20 years
Depends on policy
No-exam term policies up to $1 million online, with the option to upgrade to permanent life insurance later.
loading

Compare up to 4 providers

Bottom line

The face amount of your life insurance policy is also known as the death benefit and is paid out to your beneficiaries. Cash value only applies to permanent life insurance policies and is similar to an investment account. If you withdraw your cash value for your own use during your life, your face amount will be reduced by the amount that you take out.

If you’d like to find out more about life insurance, compare life insurance companies to see if a permanent life insurance policy is right for you.

More guides on Finder

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and finder.com Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site