How is the payable death benefit calculated when a partial withdrawal has been made from the policy?

The calculation of the payable death benefit following a partial withdrawal from a life insurance policy typically involves adjusting the face amount based on the amount withdrawn and any associated loss of earnings. Specifically, when a policyholder makes a partial withdrawal, the death benefit is reduced by the amount of the withdrawal itself because the insurer's liability decreases as less coverage is in force.

Additionally, while the concept of "earnings lost" can be somewhat nuanced, it often reflects the lost potential growth of the invested portion of the premium. However, in the context of calculating the death benefit when an actual withdrawal has occurred, the direct adjustment is primarily focused on the face amount relative to the money taken out.

In this case, the correct choice effectively reflects how the policy's value changes after the withdrawal. The face amount is decreased by the amount withdrawn, which directly reduces the insurer's risk exposure. This type of calculation maintains clarity on how much benefit will be available to the beneficiaries at the time of death.

This approach ensures that the death benefit remains aligned with the actual amount of insurance coverage that is still in force following the withdrawal, addressing both the factual decrease in coverage and how it relates to the policy's continued value.