Nepal’s life insurance business is already more than fifty years old. The last twenty years have witnessed a gradual growth in the number of people who are taking insurance seriously. In Nepal, life insurance is starting to get popular among the major population. In this article we will look at the what, why, and how of life insurance.
Nobody likes to think or imagine their death, which is why many of us neglect to arrange an insurance policy at an early age. Life insurance is something that will cost less when purchased in the youngest ages because most people are in their healthiest states. When people are older, they find that they have difficulties qualifying for coverage.
What is Life Insurance?
A life insurance policy is a legal contract between a policyholder and an insurer, where the insurer agrees to pay the beneficiaries of the insured person a certain amount of money in the event of policy holder’s death. In return, the policyholder is required to pay the insurer a certain pre-determined amount at regular intervals.
In more simple words, if you want to get life insurance then you agree to pay a certain amount to a company every month and the company agrees to pay your beneficiaries a certain amount if you die while the policy is active.
Why do you need life insurance?
If you are contributing financially to your family they will suffer when you die. They can be your spouse, children, or business partner. You want to make sure family members and near and dear ones are not burdened after you are gone and want to make sure there is enough money to cover your final expenses. To understand if you need life insurance, you need to think through the worst-case scenario.
If you die tomorrow, how would your loved ones fare financially? Without your contribution, can they meet ongoing living expenses, like the rent, food, clothing, healthcare, education, etc.? Would your family be able to pay for your final expenses?
It helps make sure that the people you care about will be provided for financially, even if you’re not there to care for them yourself. It can be great especially if you have financial dependants.
How much cover do you need?
Most policies have a set of the minimum and maximum amount of payout, but there is usually flexibility within those boundaries. It’s a good idea to agree on a big enough payout to clear any debts and provide for your family, but it depends on your circumstances.
How much does life insurance cost?
Insurers look at the length of the term and the size of the payout when they set the payout limit. Generally, you should aim to pay 20 percent of your annual salary for the policy. The actual cost of the monthly payment will vary from one person to the other depending on various things such as
- age
- gender
- lifestyle
- health
- occupation
- family medical history
- how much you want to be insured for
- type of insurance
Generally, life insurance pays out when you die but it is not that simple and there are some differences between the types of cover and the size of the premiums you have to pay.
Type of life insurance cover
Term life
The simplest form of insurance. You purchase coverage for a specific price for a specified period e.g. 5 or 10 or 20 year. If you die during that time, your beneficiary receives the value of the policy. It is important to remember that term insurance only pays out if you die within the term. So, if you take out a 15-year policy and die after 16 years, your family will get nothing.
Whole life
Similar to term, but you purchase the policy to cover your “whole life” not just a fixed period. Premiums remain level throughout the life of the policy, and the company invests at least a portion of your premiums.
Joint term life
You can take out individual term insurance policies or you can take out a policy in joint names, which will pay out on the first death. It’s always a good idea to check and compare the price for a single term against a joint term.
Some Limitations of life insurance policy you need to be aware of
- Most of the policies also include some limitations and the limitations include some terms where the insurance company may not pay out.
- The insurer won’t pay if the monthly payments aren’t being made regularly.
- If they found out that you lied when taking the insurance.
- If you have taken fixed-term life insurance and the insurance policy has expired.
- Your lifestyle has changed significantly and they haven’t informed the insurer.
- Certain policies allow you to withdraw or borrow against accumulated cash value during your lifetime if you need but this feature should be used with accuracy, withdrawals generally decrease your death benefit.
It’s important for individuals to carefully review the terms and conditions of each policy, including coverage, premiums, exclusions, and benefits. Policy offerings may vary, and new products may be introduced by the insurance company over time. For the most accurate and up-to-date information on Life Insurance Company’s policy offerings, individuals are advised to contact the company directly or visit its official website.
Which company provides life insurance in Nepal
There are several Nepal life insurance companies in Nepal.
List of Nepal life insurance companies
- American Life Insurance(MetLife)
- Asian Life Insurance Company Limited
- Citizen Life Insurance Company Limited
- Himalayan Life Insurance Limited
- IME Life Insurance Company Limited
- Life Insurance Corporation Limited
- National Life Insurance Company Limited
- Nepal Life Insurance Company Limited
- Prabhu Life Insurance Company Limited
- Rastriya jiban Beema Company
- Reliable Life Insurance Company Limited
- Sanima Life Insurance Company Limited
- Sun Nepal Life Insurance Company Limited
- Surya Life Insurance Company Limited
