5 types of life insurance in Nepal — explained plainly
Most Nepalis only ever see one plan, not the full menu. Here's what each type really costs, what you actually get back, and who it genuinely suits — so you can choose with the whole picture in front of you.
✓Last reviewed: June 2026
Before the 5 types — the basics
How life insurance actually works
You pay a premium
A set amount each year — monthly or quarterly options too. It is small relative to the cover it buys.
The insurer pools it
Your premium joins thousands of others in a regulated pool, supervised by the Nepal Insurance Authority (NIA).
Your family is protected
If you die during the policy term, your nominee receives the full sum assured — often 100×+ a single year's premium — income-tax free.
The whole idea: you pay a little, consistently, so your family receives a lot at the one moment they would need it most.
1. Term Life Insurance
Term insurance pays a lump sum to your family if you die during the policy period. If you survive, you get nothing back. That is why it is the cheapest way to get a large coverage amount.
How it works
You choose a coverage amount (sum assured) and a term — for example, NPR 50 lakh for 20 years. If you die within those 20 years, your nominee receives NPR 50 lakh. If you live, the policy ends and you receive nothing. The premium is purely the cost of that protection.
Who it is for
Anyone who needs large coverage at low cost: primary earners with dependents, people with home loans or business debts, parents who want to protect their children's education. A 35-year-old can get NPR 50 lakh of coverage for roughly NPR 18,000–22,000 per year.
An agent earns up to 10% of your first-year premium on a term plan. On a long-term endowment plan, they can earn up to 25%. On a NPR 10,000 annual premium, that difference is up to NPR 1,500 in their pocket. Term is always the right product for pure protection — the financial incentive just points the other way.
2. Endowment Plan
An endowment plan pays out whether you die or survive the policy term. If you die, your nominee receives the sum assured. If you survive to maturity, you receive the sum assured plus accumulated bonuses. It is insurance and savings combined — but the savings return is poor.
How it works
You pay a higher premium (roughly 10–13× more than term) for the same sum assured. At maturity, you receive the sum assured plus reversionary bonuses declared annually by the insurer. The bonuses are not guaranteed — they depend on the insurer's investment performance.
The real return — what agents don't say
For a 35-year-old buying a 20-year endowment plan with NPR 25 lakh sum assured, the effective annual return on your money (IRR) is approximately 4.1%. A bank Fixed Deposit currently returns 8.5% per year. Your money tied in an endowment plan earns roughly half what a bank savings account would give you.
The usual pitch for endowment is: "Pay NPR X for 20 years, get NPR Y at maturity — your money back plus more." What is easy to miss: if you had put that same NPR X each year in a Fixed Deposit, you would likely have more than NPR Y at the end. Endowment is not a bad product — it simply bundles savings with cover, so the return is lower than pure savings. Choose it if you genuinely want forced savings AND life cover in one product and you understand the trade-off.
What you get back if you cancel early (industry average)
Surrender values are rarely shown upfront. Percentages shown are approximate share of total premiums paid that you would receive back.
Industry average. Actual values vary by insurer and policy. Source: insurer-published policy terms.
3. Whole Life Insurance
A whole life policy covers you for your entire life — not just a fixed term. You pay premiums for a set period (usually 20–30 years), after which the policy is paid up and coverage continues until death. Your nominee is guaranteed to receive the payout eventually.
How it works
Premiums are higher than endowment because coverage lasts indefinitely. The policy builds a cash value over time, and you can take a loan against it. At death, your nominee receives the sum assured plus accumulated bonuses, regardless of when you die.
Who it is for
Whole life insurance makes sense for estate planning — if you want to leave a guaranteed amount to your heirs regardless of when you die, or if you have dependents who will need long-term financial support. For most people under 50 with a specific financial goal, a term plan or endowment is more appropriate.
4. ULIP — Unit Linked Insurance Plan
A ULIP splits your premium in two: one part buys life cover, the other is invested in market funds, so the maturity value is not guaranteed. It is worth understanding because agents sometimes pitch "investment" or "market-linked" plans — but as of our 2026 review, no Nepali insurer actually sells a true unit-linked plan. It is common in India and elsewhere, not here.
How it works where it is sold
Where ULIPs exist, you choose a fund allocation (say 60% equity, 40% debt); the life-cover portion stays fixed while the invested portion rises and falls with the market, net of fund-management, administration, and mortality charges. None of this applies to a policy you can buy in Nepal today — the Nepali market is entirely traditional: term, endowment, whole life, and money back.
Because no Nepali insurer is approved to sell unit-linked plans, any "market-linked" or high-return "investment" policy you are offered is most likely a traditional endowment described loosely — or a product not approved for sale here. Ask for the product's regulatory approval and the full charges in writing before you sign anything, and never accept a guaranteed return figure on anything described as market-linked.
5. Money Back Plan
A money back plan pays you a percentage of the sum assured at regular intervals during the policy term — not just at maturity. If you die during the term, your nominee receives the full sum assured regardless of how much you have already received.
How it works
For example, a 20-year money back plan for NPR 25 lakh might pay you NPR 5 lakh every 5 years (years 5, 10, 15) and NPR 10 lakh at maturity — plus bonuses. The periodic payments make it useful for goals with specific cash needs: a child's education at year 10, a wedding at year 15, retirement income at year 20.
The trade-off
Because some money is returned early, the compounding effect is reduced. The effective IRR is lower than endowment plans (~3.6%), and premiums are higher. The periodic payout structure is useful for disciplined savers who would otherwise spend their savings — but the return is still poor compared to a Fixed Deposit.
What your money actually earns — IRR comparison IRR IRR = the real annual % return on your money, like a bank interest rate. Higher is better.
Representative estimates for a 35-year-old on a 20-year plan — actual returns depend on each company's bonus declarations. A lower IRR than a bank Fixed Deposit means you are paying for protection, not savings — and that protection is worth having, but you should know the cost.
| Plan Type | Avg IRR (20 yr) | Bank FD (8.5%) | Difference | Agent Commission (max, yr 1) |
|---|---|---|---|---|
| Endowment | 4.1% | 8.5% | −4.4% | up to 25% |
| Whole Life | 3.8% | 8.5% | −4.7% | up to 25% |
| Money Back | 3.6% | 8.5% | −4.9% | up to 25% |
| Term | Pure protection — no savings | 8.5% | N/A | up to 10% |
Assumes: Age 35, NPR 25L sum assured, held to full maturity. FD rate: NRB avg FY 2081/82. IRR figures are industry averages — actual values vary by insurer and bonus declarations. Commission percentages are the regulated year-1 maximums under Insurance Regulation 2081, Schedule 9 (savings-type plans up to 25%, term up to 10%); renewal-year rates are lower (about 5% from year 3).
Already have an endowment or whole life plan? Should you stay?
The answer depends on where you are in the policy. Here are the facts.
- You are in year 10 or later — most of the penalty period is behind you
- You have dependents who rely on the life cover and cannot replace it cheaply (age 50+ with health issues)
- The forced savings discipline has actual value to you — you would spend the money otherwise
- You are within 5 years of maturity — the compounding loss of surrendering now exceeds the gain
- You are in year 2–4 and have not yet passed the highest-penalty window
- You can replace the life cover with a cheaper term plan
- The money freed up can be put into a higher-return vehicle (FD, mutual fund) for the remaining term
- Your financial situation has changed and the premium is a genuine hardship
Run the actual numbers for your policy to see which path leaves you with more at your original goal date.
Run the numbers: Stay vs Surrender →