Tennessee Life Producer Practice Exam

In life insurance, what does the term "face amount" refer to?

1. The premium amount paid

2. The total coverage amount payable upon death

3. The cash value of the policy

4. The amount for administrative fees

The correct answer is: The total coverage amount payable upon death

The term "face amount" in life insurance refers to the total coverage amount that is payable to the beneficiary upon the death of the insured individual. This is essentially the dollar value stated on the policy that represents the insurer's obligation to pay upon a specific event, such as the death of the policyholder. Understanding the face amount is crucial because it defines the primary reason most individuals purchase life insurance: to provide financial security to their loved ones in the event of their passing. This amount does not include other policy features, such as cash value or premium costs, which are distinct aspects of a life insurance policy. By focusing on the face amount, policyholders can ensure that the coverage meets their financial goals and provides adequate support for beneficiaries.