Amount at Risk
Categories: Insurance
In a permanent life insurance policy, you can accrue a “cash value” as you pay your premiums over the years. You can borrow the cash you accumulate or cancel the policy and receive the cash value if you no longer want the life insurance. "Amount at risk" refers to the difference between the total value of your life insurance policy and the cash value it has accrued.
In other words, this is the amount the insurer would have to pay out of its own money should you kick the bucket. For example, let’s say you take out a $300,000 permanent (also called whole life) insurance policy so your heirs can live in the style to which they’ve become accustomed. You keep the policy for 20 years. You’ve accumulated $80,000 in cash value, so the “amount at risk” that the insurance company has to come up with is $220,000 if you die in that 20th year.