Business Glossary

<ol><li>difference between the face value of a permanent life insurance policy and its accrued cash value.</li><li> in property and liability insurance, the lesser of the policy limit or the maximum possible loss to the insured.</li></ol>

1. difference between the face value of a permanent life insurance policy and its accrued cash value. The pure cost of protection is based on this difference. For example, if the face value of a life insurance policy is $100,000 and the cash value is $80,000 then the net amount at risk is $20,000. From the Internal Revenue Service perspective, a corridor of protection or net amount of risk must be apparent in a life insurance policy if the policy is to retain its tax advantaged treatment.
2. in property and liability insurance, the lesser of the policy limit or the maximum possible loss to the insured.