What is the formula for calculating the total death benefit in a life insurance policy?

The total death benefit in a life insurance policy is calculated by adding the face amount of the policy to the cash value. The face amount represents the initial guaranteed payout that the policy provides upon the insured's death, and the cash value is the amount that has accumulated within the policy over time due to the policyholder's premiums and the insurer's interest.

In many types of life insurance, such as whole life or universal life, the cash value can be considered an important component of the overall value of the policy. When the insured passes away, the beneficiary receives the death benefit, which is typically the face amount along with any accumulated cash value, ensuring that they receive the full financial support intended.

This understanding clarifies why simply considering cash value or premiums paid would not yield an accurate total death benefit. Cash value alone does not account for the guaranteed benefit intended for the beneficiaries, and premiums represent the cost of the insurance rather than a benefit amount. Therefore, combining the face amount and cash value accurately reflects the comprehensive financial protection that the policy offers.