Good question mindy.hammon. What kind of class are you in?
Term insurance is considered "pure" insurance; there are no fancy living benefits like those found in permanent insurance policies such as cash value, loans, surrenders and things like that. If a policyowner were to borrow or surrender part of their cash value and didn't pay the money back to the company, the face amount would be lowered by that amount which would reduce the death benefit.
Since term insurance doesn't normally contain cash value, there isn't any way to "subtract" from the death benefit like there is in a cash value policy. So most people think that the death benefit is the face amount in term insurance. Not necessarily.
What if, for example, there was an accidental death benefit rider attached to a policy with a $100k face amount? The face amount is $100,000, but the death benefit actually paid would be higher if the insured dies accidentally. Does that make sense? Remember that there are lots of riders that can affect the death benefit.
So, simply put- the death benefit and the face amount MIGHT be the same amount, or.....they might NOT be the same amount.
Hope this actually helps and didn't confuse the daylights out of you! I still want to know what kind of class this is for...is it for an insurance prelicense class?
InsTeacher 8)
Posted: Thu Mar 18, 2010 02:50 am Post Subject: that question
thanks so much.. your answer did help me for class ...plus i did some online reseach and actually reread the book to figure it ou
Posted: Thu Mar 18, 2010 02:14 am Post Subject:
Good question mindy.hammon. What kind of class are you in?
Term insurance is considered "pure" insurance; there are no fancy living benefits like those found in permanent insurance policies such as cash value, loans, surrenders and things like that. If a policyowner were to borrow or surrender part of their cash value and didn't pay the money back to the company, the face amount would be lowered by that amount which would reduce the death benefit.
Since term insurance doesn't normally contain cash value, there isn't any way to "subtract" from the death benefit like there is in a cash value policy. So most people think that the death benefit is the face amount in term insurance. Not necessarily.
What if, for example, there was an accidental death benefit rider attached to a policy with a $100k face amount? The face amount is $100,000, but the death benefit actually paid would be higher if the insured dies accidentally. Does that make sense? Remember that there are lots of riders that can affect the death benefit.
So, simply put- the death benefit and the face amount MIGHT be the same amount, or.....they might NOT be the same amount.
Hope this actually helps and didn't confuse the daylights out of you! I still want to know what kind of class this is for...is it for an insurance prelicense class?
InsTeacher 8)
Posted: Thu Mar 18, 2010 02:50 am Post Subject: that question
thanks so much.. your answer did help me for class ...plus i did some online reseach and actually reread the book to figure it ou
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