What Does Amount at Risk Mean?
Amount at risk refers to the amount of money that a life insurance company will have to pay out in death benefits if a policyholder dies, after the cash value has been taken out. This value is typically calculated by subtracting the accumulated cash value of the policy from the total death benefit that the policy offers to the policyholder.
Insuranceopedia Explains Amount at Risk
Many life insurance policies accumulate cash value as time goes on. This is because money from the premiums is often invested in order to grow the policy value. However, oftentimes, the cash value of the policy does not grow large enough to surpass the death benefits owed by the insurer in the event of the death of the policyholder. So, the insurer will still be responsible for paying out whatever money is owed after the cash value has been given to beneficiaries. This amount is the amount at risk. So, for example, if the cash value of a life insurance policy is $50,000, and if the death benefit is $200,000, then the amount at risk is $150,000.