How life insurance commissions work in Nepal
Agents earn a commission out of your premium, set by the Nepal Insurance Authority — and it's higher on some plans than others. Knowing how it works lets you read any recommendation clearly and choose the cover that genuinely fits you. Here are the facts, straight from NIA regulation.
We maintain a directory of licensed agents. The facts on this page apply to all agents — including ours. Verify an agent's NIA licence →How much your agent earns from your policy
Commission is paid by the insurer out of your premiums. The rates are set by the Nepal Insurance Authority and are uniform across every licensed life insurer — endowment and whole-life plans share one schedule, tiered by your policy term.
| Policy term | Year 1 | Year 2 | Years 3–10 |
|---|---|---|---|
| 5–7 years | 10% | 5% | 5% |
| 8–9 years | 10% | 10% | 5% |
| 10–14 years | 15% | 15% | 5% |
| 15–19 years | 25% | 15% | 5% |
| 20 years or more | 25% | 25% | 5% |
Term life insurance: up to 10% of premium. Single-premium policies: up to 6%. Source: NIA Insurance Regulation 2081, Schedule 9.
A long-term endowment or whole-life plan pays up to 25% in year-one commission, against up to 10% on a term plan of the same premium — so a savings plan can earn an agent roughly 2.5× more up front. Term delivers more coverage for the same cost, but agents earn less from it. This is not fraud; it is the incentive structure. Knowing it helps you ask the right questions.
9 things your agent may not mention
These are NIA-sourced facts. None of them are typically disclosed unprompted.
Renewal commission drops sharply after year one
Year-one commission on a long-term endowment is up to 25%. By year 3 it falls to 5%. An agent who sells you a new policy every few years — advising you to surrender the old one — earns far more than an agent who simply services a long-running policy. Watch for unsolicited "upgrade" advice.
Churning your policy is illegal — and costs you money
Churning means advising you to surrender a running policy and buy a new one without a genuine financial benefit to you. It resets your surrender timeline to zero, you lose accumulated bonuses, and the agent collects another year-one commission. Churning is prohibited. If your agent suggests this, ask for a written cost-benefit comparison first.
You must receive a Benefit Illustration before you sign
A Benefit Illustration is a document showing your projected premiums, maturity value, and surrender values at years 3, 5, 10, and maturity. Agents are required to provide this before policy issuance — not after. If you haven't seen one, ask before signing anything. An agent who cannot or will not produce one is not complying with regulations.
Verbal promises are legally worthless
Whatever an agent promises verbally — a specific return, a waived clause, a bonus, a free rider — has zero legal standing unless it appears in the signed policy bond. Insurers are not bound by what their agents say outside the contract. If you are offered something verbally, ask for it to be written into the policy before you pay the first premium.
Endowment IRR is typically 3.6–4.1% — below bank FD rates
The internal rate of return on a typical Nepal endowment plan, held to maturity, works out to roughly 3.6–4.1% per year on illustrative figures — below current bank fixed deposit rates of 8–9%. Endowment combines insurance with savings, but as a savings vehicle it underperforms. Term plan + FD is mathematically better for most people. Agents rarely present this comparison.
Early surrender wipes out most of what you've paid
On a typical endowment plan, surrendering in the first few years returns only a fraction of total premiums paid — illustratively around 20–35% by year 3 — and you must hold the policy for most of its term before the surrender value catches up to what you have paid in. The exact figures are in your Benefit Illustration, but they are rarely explained clearly at the point of sale.
No Nepali insurer currently sells ULIPs or market-linked plans
A ULIP (unit-linked plan) splits your premium between life cover and market funds, with no guaranteed maturity value. They are common in India but, as of our 2026 review, none of Nepal's 14 licensed life insurers offers one. So if an agent pitches a "market-linked" or high-return "investment" plan, be skeptical — it 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.
No agent can guarantee a projected or market-linked return
Only the guaranteed benefits written into your policy document and Benefit Illustration are promised. Any value that depends on future bonus declarations or market performance is a projection, not a guarantee. An agent who quotes you a specific, fixed maturity figure for a non-guaranteed benefit is mis-selling — ask which part of the number is guaranteed in writing and which is only illustrated.
You can compare all 14 insurers — and buy from anyone
You are under no obligation to buy from the agent who approaches you. All 14 insurers operate under the same regulatory framework. You can compare plans independently, then contact the insurer's branch directly or choose any licensed agent. Independent comparison is the most effective protection against mis-selling.
7 red flags — pause if you hear any of these
If your agent says or does any of the following, slow down and verify before signing.
- Agent quotes a specific guaranteed return on a "market-linked" or "investment" plan
- Agent says "no need to read the document, just sign here"
- Agent pressures you to decide on the same day — "offer expires today"
- Agent cannot show you their NIA licence number when asked
- Agent recommends surrendering a running policy to start a new one, without a written financial comparison
- Agent discourages you from comparing premiums or plans at other insurers
- Agent has not provided a Benefit Illustration document before asking you to sign
Verify your agent's NIA licence
Every authorised agent has a unique NIA licence number. Ask for it. You can verify active licences on nia.gov.np →. An agent without a current licence is operating outside the law — any policy they sell may face complications during claims.
Compare without an agent — right now
Our tools show you every plan from all 14 insurers, with premiums, claim ratios, and surrender timelines. The full picture, in one place.