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. Life Insurance

    A protection against the loss of income that would result if ...
  2. Accelerated Benefits

    A clause in certain life insurance policies that enables the ...
  3. Decreasing Term Insurance

    A type of annual renewable term life insurance that provides ...
  4. Permanent Life Insurance

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

    A form of permanent life insurance, Variable life insurance provides ...
  6. Acceleration Life Insurance

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

    Life Insurance With an Increasing Death Benefit

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

    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

    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.
  4. Financial Advisor

    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.
  5. Insurance

    Should You Buy Term or Permanent Life Insurance?

    When choosing between term or permanent life insurance you'll need to consider these factors.
  6. Financial Advisor

    Buying a Life Insurance Policy? Read This First

    Knowing who needs life insurance, how it works and the different types of insurance can help consumers make informed decisions about this product.
  7. 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.
  8. Insurance

    How Good An Investment Is Life Insurance?

    Compared to other options, does it ever make sense to include cash-value life insurance in your investment portfolio? A look at the pros and cons.
  9. Insurance

    Tips for Helping Clients with Life Insurance Needs

    Life insurance needs will likely change over the client’s lifetime and again financial advisers can provide an objective sounding board.
  10. Financial Advisor

    Variable Vs. Variable Universal Life Insurance

    Do you know why you might need one policy versus the other? Read on to find out.
Hot Definitions
  1. Salvage Value

    The estimated value that an asset will realize upon its sale at the end of its useful life. The value is used in accounting ...
  2. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  3. Promissory Note

    A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on ...
  4. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  5. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  6. Absolute Advantage

    The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost ...
Trading Center