DEFINITION of 'Amount at Risk'

The monetary difference between the death benefit paid by a permanent life insurance policy and the accrued cash value. For example, if a policy's death benefit is $200,000 and its accrued cash value is $75,000, then the amount at risk equals $125,000. The amount at risk determines the cost of protection provided by the policy.

BREAKING DOWN 'Amount at Risk'

For property and casualty insurers, amount at risk means the lesser of the full amount of coverage in the policy and the maximum possible loss that can be sustained by the insured. Therefore, this amount ultimately pertains to the insurers and not the insured.

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