Net Amount at Risk
Also called NAR, net amount at risk, amount at risk, corridor
The death benefit minus the cash value — the insurer's own exposure, and the exact base the monthly cost of insurance is charged on.
Net amount at risk is a deceptively simple subtraction: death benefit minus cash value. It’s the slice of the payout the insurer would have to cover from its own money if you died today, because the rest is already funded by your cash value. If a policy carries a $500,000 death benefit and holds $120,000 of cash value, the insurer’s real exposure — the net amount at risk — is $380,000.
That number matters because it’s the base the cost of insurance is charged on. COI is quoted per $1,000 of net amount at risk, so your monthly mortality charge is the per-$1,000 rate multiplied by the NAR. This is the mechanism behind one of the most counterintuitive facts about permanent insurance: two forces pull in opposite directions. As cash value grows, the NAR can shrink, which lowers the charge — but the per-$1,000 COI rate rises every year with your age. Whichever force wins decides whether the policy gets easier or harder to sustain.
In practice, on aging universal life and IUL policies, the rising COI rate frequently wins. If the cash value stalls in a run of flat years while the mortality rate keeps climbing, the charge on the net amount at risk can spike and eat the policy from the inside — the mortality-table mechanics that turn a “self-sustaining” policy into a lapsing one.
Net amount at risk also explains why overfunding has limits: push cash value too high relative to the death benefit and you approach MEC territory and the tax-code corridor rules. When someone shows you a permanent policy, a sharp question is: “What happens to the cost of insurance on the net amount at risk at ages 80, 85, and 90 on the guaranteed scale?”
Net amount at risk is the hidden gear that makes permanent-policy costs behave the way they do. The [cost of insurance](/glossary/coi/) is charged per $1,000 of NAR, so understanding it explains why a policy can drain itself even as the cash value grows.
A policy has a $500,000 death benefit and $120,000 of cash value, so the net amount at risk is $380,000 — that's what the insurer would actually pay from its own pocket. The monthly cost of insurance is charged on that $380,000, not the full $500,000. As you age, the per-$1,000 rate climbs even if the NAR shrinks.
The interaction between a rising COI rate and the net amount at risk in old age. If cash value stalls while the per-$1,000 charge keeps climbing, the cost of insurance on the NAR can spike and quietly hollow out the policy.