NET AMOUNT AT RISK Meaning and
Definition
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Net Amount at Risk (NAR) refers to the maximum financial exposure or liability that an individual or entity faces in a particular transaction or investment. It is commonly used in the insurance industry to determine the potential loss or claim amount for a policyholder.
The NAR is calculated by subtracting the deductibles and other limit reductions from the total insured amount. It represents the actual monetary risk or exposure faced by the policyholder, as this is the amount that would have to be paid out in the event of a claim.
For example, if a policy has a total insured amount of $1 million and deductibles and other limit reductions that amount to $200,000, then the NAR would be $800,000. This means that the policyholder would be responsible for any loss or claim amount up to $800,000, while the insurer would cover any amount exceeding this.
The NAR is an important metric for both insurance companies and policyholders, as it helps in assessing the level of risk associated with a particular policy or investment. It enables individuals and organizations to understand their potential financial exposure and make informed decisions regarding risk management and insurance coverage.
In summary, the net amount at risk represents the maximum financial liability or exposure that an individual or entity faces in a transaction or insurance policy, after deductibles and other limit reductions have been accounted for.
Common Misspellings for NET AMOUNT AT RISK
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