Net Amount at Risk

When you have life insurance, you send in monthly premium checks. These payments build up over time to create an accrued cash value...basically, the amount you've paid into the policy.

Meanwhile, for most policies, your death benefit (the amount that will get paid out to your beneficiaries when you die) has a set amount. So, early in the policy's life, you have paid far less in premiums than the company would owe if you were to die prematurely.

The difference between those figures equals the net amount at risk. The amount represents the difference between the death benefit of the policy and the accrued cash value. As the accrued value rises over time, the amount at risk diminishes. (It's nice to know that at least your insurance company is hoping you live a good, long life...more than you can say for some of your relatives.)

You have a policy with a set death benefit of $500,000. Your accrued cash value is $300,000. The amount at risk for the company is $200,000. That's the amount they would lose on the deal if you were to die suddenly in a horrible snowmobile accident (or any other way...you just happen to be really afraid of snowmobile-related death).

You've paid in $300,000...they'd have to pay out $500,000. At that moment, they are on the hook to lose $200,000.