Face amount definition

What is the Face Amount on a Financial Instrument?

The face amount is the value stated on the face of a financial instrument. The term usually applies to the amount stated on a bond certificate, which the issuer is obligated to pay when the bond matures. This face amount is usually set at $1,000. A bond can sell at a discount or premium to its face amount, depending on the interest rate that an investor wants to achieve. Thus, paying less than the face amount results in a higher effective interest rate, while paying more than the face amount results in a reduced effective interest rate.

What is the Face Amount on an Insurance Policy?

The face amount on an insurance policy is the stated dollar value that the insurer agrees to pay to the beneficiary upon the insured's death or upon policy maturity, depending on the policy type. It is also referred to as the coverage amount or death benefit in life insurance. This amount is fixed at the time the policy is issued and does not include additional benefits like dividends, interest, or riders. The face amount serves as the primary measure of financial protection offered by the policy.

What is the Face Amount on Currency?

Face value can refer to the amount stated on a coin or banknote. Thus, a United States banknote with a stated value of $100 has a face amount of $100.