Death benefit options
Life insurance contracts set a policy’s face amount, the amount that would be paid as a death benefit under a traditional life insurance policy. However, some policies pay death benefits in excess of their face value, and others permit the face value to be changed. Weigh the following types of death benefit for the one that best suits your interest.
A level benefit is the standard. Your death benefit equals your life insurance policy’s face value, which does not change.
Increasing benefit life insurance
An increasing benefit life insurance policy pays the policy’s face amount, plus its cash value. This option is only available for universal life insurance.
Decreasing benefit life insurance
Do not associate decreasing benefit life insurance with increasing benefit life insurance. A decreasing benefit is only available with term life insurance. The face amount of a decreasing benefit term life insurance policy actually decreases periodically, creating a policy which is cheaper than a level term policy.
Variable benefit life insurance
Variable benefit life insurance pays the policy’s face amount, plus your cost basis—a refund of the money you paid for the policy.
Graded benefit life insurance only pays a refund of your premiums for the first two years. After that, the death benefit becomes the policy’s face amount.
Adjustable life insurance allows the policyholder to alter his or her policy’s face amount.
