Legal Definitions - face amount insured by the policy

The term face amount insured by the policy refers to the specific sum of money that an insurance company contractually agrees to pay out if a covered event occurs, as explicitly stated on the policy's main declaration page. It represents the maximum financial benefit or coverage provided by the policy for that particular event, before any deductibles or other adjustments are applied.

Here are some examples to illustrate this concept:

• Life Insurance: Imagine a person purchases a life insurance policy. The policy document clearly states that the face amount insured by the policy is $750,000. If the insured individual passes away while the policy is in force, their designated beneficiaries will receive this $750,000. This amount is the principal sum the policy was designed to pay out upon the occurrence of the covered event (the insured's death).

• Homeowner's Insurance (Dwelling Coverage): A homeowner has an insurance policy for their house, and the policy's declarations page specifies that the dwelling coverage has a face amount insured by the policy of $400,000. If a catastrophic event, such as a fire, completely destroys the home, the insurance company will pay up to $400,000 to rebuild it, assuming the damage is covered and the cost does not exceed this amount. The $400,000 represents the maximum payout for the physical structure of the home.

• Accidental Death & Dismemberment (AD&D) Policy: An employee receives an AD&D policy as part of their benefits package, with a face amount insured by the policy of $200,000. If the employee suffers a fatal accident covered by the policy, their beneficiaries would receive $200,000. If the accident results in a covered dismemberment (e.g., loss of a limb), the policy might pay a percentage of that $200,000, as defined in the policy terms. The $200,000 is the principal sum upon which all other payouts for covered accidents are based.