Amount at Risk

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.

RELATED TERMS
  1. Add To Cash Value Option

    A common benefit option on life insurance policies wherein the ...
  2. Level Death Benefit

    A life insurance payout that is the same whether the insured ...
  3. Accelerated Benefits

    A clause in certain life insurance policies that enables the ...
  4. Permanent Life Insurance

    An umbrella term for life insurance plans that do not expire ...
  5. Term Life Insurance

    A policy with a set duration limit on the coverage period. Once ...
  6. Acceleration Life Insurance

    A type of policy that pays a portion (typically 25\% or 50\%) ...
Related Articles
  1. Insurance

    Life Insurance With an Increasing Death Benefit

    Why buy a life insurance policy with an increasing rather than level death benefit
  2. Investing

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  3. Insurance

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  4. Home & Auto

    Intro To Insurance: Types Of Life Insurance

    By Cathy ParetoLife insurance protection comes in many forms, and not all policies are created equal, as you will soon discover. While the death benefit amounts may be the same, the costs, structure, ...
  5. Options & Futures

    Permanent Life Policies: Whole Vs. Universal

    If you're looking for life-long security, choosing between these two is the key.
  6. Insurance

    Life Insurance: Putting A Price On Peace Of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
  7. Insurance

    6 Ways To Capture The Cash Value In Life Insurance

    If you die with cash value left in your life insurance policy, the money goes to the insurance company – not to your beneficiaries. Here's what to do instead.
  8. Insurance

    How Cash Value Builds In A Life Insurance Policy

    If you have permanent life insurance, more of your insurance premium goes to cash value in the early years of your policy: a step-by-step guide.
  9. Personal Finance

    How Survivorship Life Insurance Works

    Should you buy a survivorship life insurance policy?
  10. Investing

    7 Issues to Consider When Determining Life Insurance Coverage

    Seven issues to consider when buying life insurance to ensure the coverage is tailored to meet your personal financial situation.
RELATED FAQS
  1. What is the difference between the death benefit and cash value of an insurance policy?

    Understand the difference between the various components of a life insurance policy including the death benefit and a policy's ... Read Answer >>
  2. How can I borrow money from my life insurance policy?

  3. What is term insurance?

    Term insurance is a type of life insurance policy that provides coverage for a certain period of time, or a specified "term" ... Read Answer >>
  4. What is the difference between term and universal life insurance?

    Term life insurance is the most basic of insurance policies. It is nothing more than an insurance policy that provides protection ... Read Answer >>
  5. How do I determine the face value of a life insurance policy?

    Read about how to determined the face value for any life insurance policy, and see what circumstances can trigger a change ... Read Answer >>
  6. How are life insurance proceeds taxed?

Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center