Glossary

Retention limit

The most an insurer will keep at risk on a single life before passing the excess to reinsurers.

Also called: retention, retention level

A retention limit is the maximum death benefit an insurer will keep for its own account on one insured person. Coverage above that amount is ceded to one or more reinsurers. Retention depends on the insurer's size and capital, and limits often vary by age and rate class.

Here's how it plays out in a hypothetical example: an insurer with a $5 million retention issues a $20 million policy. It keeps $5 million of the risk and cedes $15 million through automatic reinsurance treaties, which let it bind the reinsurers without sending them the file. If a case is unusual or too large for the treaties, the insurer submits it facultatively, meaning reinsurers underwrite it individually and may offer their own terms.

Retention limits matter mainly to people buying large policies. Automatic treaties also have caps, often called jumbo limits, based on the total coverage a person already has in force and is applying for across all insurers. Cases above them must be underwritten facultatively, which can add weeks and sometimes leads to splitting coverage among several insurers. For wealthy families and business owners, see life insurance for high-net-worth families and how underwriting works.

Last reviewed October 4, 2026

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Related terms

Reinsurance Insurance that insurance companies buy, passing part of the risk on policies they've sold to another company called a reinsurer. Net amount at risk The part of a death benefit the insurer would pay from its own funds: the total death benefit minus the policy's cash value or reserve. Underwriting The process an insurer uses to evaluate an applicant's risk, from health and lifestyle to finances, and decide whether and at what price to offer coverage. Face amount The dollar amount of coverage shown on a life insurance policy's specifications page, the base death benefit before loans, riders or dividends. Underwriter The insurance company professional who evaluates an application's risk and decides whether to approve it, in which rate class, or to decline it.

Related guides

Reinsurance: the insurers behind your insurer How life reinsurance works, why insurers buy it, who the big reinsurers are and what it means for your policy, with figures from their own 2025 reports.