Net amount at risk,
Definition of Net amount at risk:
The difference between the face value of the policy and the reserve accumulated under that policy.
The net amount at risk is the monetary difference between the amount of money paid out for a life insurance policy and the accrued cash value paid for it by the insured individual. The net amount at risk number is critical to insurance companies as it represents how much of the policy has been paid for before it has to be distributed, which impacts the profitability of the company and how it manages its reserve balances.
When an individual buys an insurance policy, they pay for it through insurance premiums on a monthly, quarterly, or annual basis. These payments grow over time and represent the accrued cash value an insured individual has paid into their policy.
How to use Net amount at risk in a sentence?
- If the net amount at risk needs to be paid out, the loss is covered by an insurance company's statutory reserves.
- The net amount at risk is the difference between the death benefit paid out on a life insurance policy and the accrued cash value paid for it by the insured.
- The net amount at risk exists until a policy has been fully paid up.
- The net amount at risk is highest in the early stages of a life insurance policy and decreases as the insured increases in age.
Meaning of Net amount at risk & Net amount at risk Definition