Life insurance in Nepal: term or endowment, what it returns, the tax deduction and claims

Life insurance (जीवन बीमा) is a contract with an insurer. You pay a premium (बीमाशुल्क), and if you die within the term, the insurer pays the sum assured (बीमाङ्क) to the person you named. Its first job is to replace the income a family loses when an earner dies. Some plans also pay if you live to the end of the term. Those are savings plans with cover attached, and most policies sold in Nepal are of that kind.

Nepal has 14 licensed life insurers, 14 non-life insurers, 7 micro insurers and 2 reinsurers, 37 in all. They are regulated by the Nepal Insurance Authority (NIA, नेपाल बीमा प्राधिकरण) under the Insurance Act 2079. NIA approves every plan before it is sold and gives it an identification code, and a plan without one may not be sold. The insurer must publish each plan's terms, benefits and exclusions on its own website. Read that page before you read an agent's leaflet: the words in the table below are what it will use.

Every life plan mixes two things: cover, which pays if you die, and saving, which pays if you live. Term insurance (म्यादी जीवन बीमा) is cover alone. An endowment plan (सावधिक जीवन बीमा) adds saving, so it pays either way. Money back (अग्रिम भुक्तानी सावधिक) plans return part of the sum assured every few years, and whole-life plans keep some cover after the term ends. The more saving a plan holds, the more it costs for the same cover. The table at the end of this section prices each kind for the same person.

What Nepalis buy is mostly saving. In the first three months of 2083/84, life insurers collected about Rs 5,873 crore in premiums, by NIA's report for Ashwin 2083. Endowment-type plans (endowment, money back, convertible, child and single premium) brought in 92.2% of it. Term plans brought in 0.68%, though they counted 1,58,900 policies, a large number for so little premium, which suggests many small group covers.

• Child plans (बालबालिका बीमा) must also cover the parent. If the parent dies, the rest of the premiums are waived and a monthly income is paid; if the child dies, the plan pays 25% of the sum assured or the premiums paid, whichever is more (directive, schedule 2).
• Micro life plans are small policies for low incomes, sold by the life insurers and by 3 micro life insurers: Guardian Micro Life, Crest Micro Life, Liberty Micro Life.

Age 30

Rs 3,185

Ages 31–40

Rs 3,675

Ages 41–49

Rs 6,125

20 years in all

Rs 95,060

Term insurance pays the sum assured if you die within the term, and nothing if you outlive it. Because nothing is saved inside it, it is the cheapest way to buy a large amount of cover, and NIA lets term plans run for as little as one year. Searches for "term life insurance" in Nepal rose 80% in the past year, by Google Trends.

Asian Life's Saral Surakshya is a one-year term plan, renewed each year at the rate for your age. Its calculator charges 3.75 per 1,000 at 30, 4.25 from 31 to 40 and 6.75 from 41 to 49, less 0.5 per 1,000 for this size of cover and 2% for paying yearly. So Rs 10 lakh costs Rs 3,185 at 30, Rs 3,675 a year through your thirties and Rs 6,125 in your forties: Rs 95,060 over 20 years.

A level-premium term plan fixes one price for the whole term instead. Nepal Life's Rakshya Kawach is one: Rs 5 lakh to Rs 1 crore, ages 18 to 59, terms of 1 to 35 years, with no surrender value and no loan. Its calculator does not quote it, so ask the insurer.

Nepal Life's iEnsure is a different thing: a term plan that pays the premiums back at the end. It costs Rs 5,891 a year, Rs 2,706 more than pure term at 30, and hands back all the premiums, Rs 1.18 lakh, at 20 years, without interest. Its product page also says the cover starts one year after the policy begins, except for accidental death. Read the "risk commencement" line on any term plan before you rely on it.

An endowment plan pays the sum assured and its bonuses at maturity, or earlier if you die. Most endowments sold in Nepal are "participating" or "with profits": the insurer shares part of its surplus with policyholders as a bonus (बोनस). Nepal Life describes its Naulo Surakshit plan in exactly those words.

The bonus is declared in rupees per 1,000 of sum assured for each year, after the insurer's actuarial valuation is approved by NIA. Once declared it is added to the policy (vested) and cannot be taken away; future years are not promised. It is simple, not compound. At Rs 65 per 1,000, a Rs 10 lakh policy earns Rs 65,000 of bonus a year, Rs 13 lakh over 20 years, paid with the sum assured at the end.

A bonus of Rs 65 per 1,000 is not 6.5% a year. It is reckoned on the sum assured, not on what you paid, and it does not compound. What it is worth depends on the premium too. A plan with a higher bonus and a higher premium can return less than one with a lower bonus and a lower premium, so compare the two together, as the worked example below does.

NIA publishes every insurer's approved bonus rates each year at nia.gov.np/bonus-rate. Its latest table, for 2080/81, gives these rates for a 20-year endowment, from Rs 42 to Rs 75 per 1,000:

Premiums paid

Rs 10.3 lakh

Maturity

Rs 23.0 lakh

Return a year, after tax

6.9%

Term for 20 years

Rs 95,060

Take Nepal Life's Naulo Surakshit endowment for a 30-year-old: Rs 10 lakh for 20 years at Rs 51,431 a year, Rs 10.3 lakh in all. (One age-year older, the calculator asks Rs 51,599.) If its 2081/82 bonus of Rs 65 per 1,000 held for all 20 years, the bonus would come to Rs 13 lakh and the maturity to Rs 23.0 lakh.

The gain, Rs 12.71 lakh above the premiums, is taxed at 5% and withheld by the insurer: Rs 63,569. That leaves Rs 22.36 lakh. The return a year (IRR) is the single yearly rate at which those premiums would have grown to that sum, the same kind of number as a deposit's interest rate. Here it is 7.16% before tax and 6.93% after.

That is more than a fixed deposit pays now: about 4%, the average top rate of 20 banks in Kartik 2083, or 3.76% after the 6% tax. It is a point the usual "never buy an endowment" advice often skips. At today's deposit rates and this bonus, an endowment's saving part is not a bad return. But it rests on the bonus. If the rate were Rs 50, Citizen Life's for this term in 2080/81, the maturity would be Rs 20 lakh and the return 5.77% after tax.

The cover is the other half. If you died after 10 years, your family would get Rs 16.5 lakh: the sum assured and ten years of bonus. But the cover is small for the money: the endowment buys Rs 19 of cover per rupee of premium, pure term Rs 314.

The usual alternative to an endowment is to buy term and invest the rest: buy pure cover for the same Rs 10 lakh, and put the rest of the Rs 51,431 into a fixed deposit or a SIP each year. With Asian Life's term premiums, that is Rs 48,246 in the first year, Rs 47,756 a year through your thirties and Rs 45,306 in your forties. The family is covered for the same sum either way; only the savings differ.

After 20 years the endowment pays Rs 22.36 lakh after its 5% tax, if the bonus holds. Term with the rest in a fixed deposit, at 4% less the 6% tax, ends with Rs 14.14 lakh: at today's deposit rates the endowment wins clearly. Term with the rest earning 8% a year ends with Rs 23.29 lakh, about the same; at 10% a year, Rs 29.75 lakh.

So the one number to weigh is the break-even: the invested money has to earn about 7.7% a year, after any tax on it, to match the endowment. Neither choice is right for everyone, and we do not tell you which to make; we are not licensed financial advisers. The questions below the chart decide it for you.

• How much cover does your family need? If it is several times Rs 10 lakh, as it is for most earners with dependants (see how much cover you need, below), an endowment for that sum costs more than most incomes can carry. Term is how a large sum becomes affordable.
• Will you really invest the difference? "Buy term and invest the rest" works only if the rest is invested, every year, for 20 years. An endowment forces the saving, and that discipline is what many buyers pay for.
• Can you keep paying for 20 years? An endowment ended early loses money in its first years (next section). A SIP or a deposit can be stopped or drawn on at any time.
• Which risk do you prefer? The endowment's return rests on future bonuses, a fund's on the market, a deposit's on what banks pay. Spreading money across more than one is common. How they fit together is in how to invest in Nepal; the funds themselves in mutual funds in Nepal.
• Is your income taxed? In the 10% or 20% band, the Rs 40,000 deduction favours the bigger premium (below). Below the SSF's tax-free line it is worth nothing.

If you stop paying, the policy first runs through its grace period, and then lapses. NIA's Life Policy Directive 2079 sets what happens next, and the surrender value follows a formula NIA wrote into the directive itself.

Paid-up. Once 2 full years' premiums are paid, an unpaid policy becomes paid-up (चुक्ता) automatically instead of lapsing (s.12); before that, a lapsed policy is worth nothing. A paid-up policy pays a smaller sum at maturity or on death: the sum assured times the years paid over the years due, plus the bonus already vested. Stop the worked example after 10 years and it becomes Rs 5 lakh plus Rs 6.5 lakh of bonus, Rs 11.5 lakh paid at year 20, for Rs 5.14 lakh paid in.

Loan and revival. A policy loan is allowed after 3 years: up to 90% of the surrender value, at least Rs 1,000, at an interest rate the insurer's board sets (s.10). After 10 years in the example that is up to Rs 5.45 lakh. Ask the rate, and how an unpaid loan is settled, before you borrow; the EMI calculator works out any loan's instalment. A lapsed policy can be revived at any time within the term by paying the missed premiums with a late fee and passing a medical check, and the insurer may waive the late fee once (s.11).

Surrender. After 3 full years you may end the policy for its surrender value (समर्पण मूल्य), under s.10. For an endowment, NIA's formula takes the paid-up value and discounts it at 6% a year for the years left to maturity, plus one. After 10 years in the example that is Rs 6.06 lakh against Rs 5.14 lakh paid, or Rs 6.01 lakh after the 5% tax on the gain. In the early years it is less than you paid:

Life insurance

Rs 40,000

Health insurance

Rs 20,000

Tax on the gain

5%

Tax year

2083/84

The Income Tax Act lets a resident individual take the premium paid on investment insurance (लगानी बीमा) off taxable income, up to Rs 40,000 a year or the premium, whichever is less (Schedule 1, s.1(12); the Finance Act 2075 raised it from Rs 20,000). The Act's definition of investment insurance (s.2(कग)) includes insurance on the insured's death, so a term premium appears to count as well as an endowment's. Health insurance with a Nepali insurer has its own Rs 20,000 (s.1(16)). Both come on top of the retirement-fund deduction. Payroll takes the deduction off your monthly tax only when HR has the premium receipt for the year.

The payout is taxed only on the gain. Section 62(2) defines the gain from investment insurance as what you receive above the premiums you paid. Section 88(2)(ख) has the insurer withhold 5% of it, and section 92(1)(ग) makes that a final withholding: the insurer deducts it and credits it to your PAN, and you need not add the payout to a tax return. In the worked example the gain at maturity is Rs 12.71 lakh and the tax Rs 63,569, 2.76% of the payout. A surrender is a payout too: after 10 years the gain is Rs 91,496 and the tax Rs 4,575. A surrender for less than you paid has no gain and no tax.

What the deduction is worth depends on your tax band. Here are three monthly salaries with basic pay at 60%, worked through the site's tax calculator for 2083/84. In the SSF the first Rs 10 lakh of taxable income is tax-free, because the 1% band is the social security tax, which SSF contributors do not pay. At Rs 50,000 a month in the SSF the tax is already nil, so a premium saves nothing. At Rs 1,00,000 it saves 10% of the Rs 40,000, and at Rs 2,00,000, 20%.

Cover is meant to replace what your income pays for. A simple way to size it is to add up what your family would have to pay without you, then take away what they would already have.

As an illustration, with every assumption stated: a family that spends Rs 40,000 a month and would need support for 10 years; a home loan of Rs 15 lakh; Rs 10 lakh for two children's schooling; and Rs 3 lakh of savings. That family needs about Rs 70 lakh of cover. The Rs 10 lakh in the worked example would cover about 2.1 years of its spending.

1. 1Add your debts: home, vehicle and personal loans still owed.
2. 2Add the years of support: monthly household spending × 12 × the years until the youngest is earning or your partner can cope alone.
3. 3Add the big goals: children's education, a parent's care.
4. 4Take away what exists: savings, retirement balances the family would receive, and cover you already have from an employer, a loan policy or the SSF.
5. 5Round up, then price that sum as term cover with two or three insurers.
6. 6Look again at marriage, a child, a new loan, or a big rise in pay.

There is no single best insurer or plan, and we do not name one. What you can compare is the same few things for each insurer, from sources anyone can check. These are the 14 life insurers NIA licenses, as its report for Ashwin 2083 lists them, after a round of mergers:

• Rastriya Jeevan Beema Company (government-owned)
• National Life Insurance
• Nepal Life Insurance
• Life Insurance Corporation (Nepal)
• MetLife (American Life Insurance Company, Nepal branch)
• Asian Life Insurance
• IME Life Insurance
• Sun Nepal Life Insurance
• Reliable Nepal Life Insurance
• Citizen Life Insurance
• SuryaJyoti Life Insurance
• Sanima Reliance Life Insurance
• Himalayan Life Insurance
• Prabhu Mahalaxmi Life Insurance

1. 1The licence: buy only from one of the 14, and ask for the plan's NIA identification code. NIA's own page warns that buying insurance abroad, from an insurer not operating in Nepal, is illegal for people here.
2. 2The price: the premium for your sum, age and term, from each insurer's calculator or a written quote.
3. 3The bonus history: NIA's bonus tables, year by year, at nia.gov.np/bonus-rate. A steady rate says more than one high year.
4. 4The solvency ratio: in each insurer's quarterly report. NIA's Risk Based Capital and Solvency Directive 2026 sets a target of 130%, and below 100% NIA steps in.
5. 5The service: whether the insurer posts its claim process and document list online, as NIA requires; branches near your family; premium payment by app or bank.
6. 6The agent: licensed by NIA, whose licence can be printed from NIA's e-services.

Anyone going abroad for work on a labour permit must buy foreign employment term life insurance, and DoFE will not issue the permit without proof of it. NIA's directive of 2080 fixes the premium and the cover for every insurer. The policy runs for the contract plus 6 months, the sum assured is Rs 10 lakh (the Foreign Employment Act's floor is Rs 5 lakh), and a Rs 400 critical-illness cover is compulsory. You pay online in FEIMS when the permit is processed.

It is the most numerous term policy in NIA's figures: in Shrawan to Ashwin 2083 alone, NIA counted 2,03,212 of them. What it pays is listed first below, then its premium, with the rider, by age and contract.

• On death abroad: Rs 10 lakh, plus Rs 1 lakh for funeral costs, Rs 2 lakh for loss of income and Rs 1 lakh to bring the body home: Rs 14 lakh. In Nepal, Rs 13 lakh.
• Permanent total disability: Rs 10 lakh. Critical illness: Rs 5 lakh. Treatment after an accident or before a critical-illness diagnosis: up to Rs 1 lakh.
• Your policy number and its expiry date are on your labour-permit record in FEIMS.
• Pending: a Foreign Employment Act amendment bill reported in August 2025 would drop this insurance and fold it into the welfare fund. It was still a draft in August 2026, and DoFE still required the insurance in June 2026.

NIA's Claim Settlement Guideline 2081 sets what an insurer must do and how fast. A claim starts the day the insurer is told: in writing, or by phone, e-mail or in person if writing is not possible, followed by writing. Each insurer must post its claim process and document list in every office and on its website.

A death claim is made by the nominee, or if none was named, by the nearest heir under the law (Insurance Act s.127), or by someone holding a power of attorney. It needs the claim details, the death certificate, the relationship certificate, and after an accident the post-mortem report or a police report. Within 15 days of the documents the insurer must decide and issue a discharge voucher; it pays within 15 days of receiving it signed. A refusal must be in writing, with reasons. Claims up to Rs 2 lakh are small claims, settled within 15 days of the minimum documents.

At maturity the insurer must write to you within 15 days asking you to bring the original policy and your ID, and pay within 7 days of your application.

They do different jobs. Life insurance pays a fixed sum when someone dies. Health insurance pays hospital and treatment bills while you are alive. A family usually needs both, and the tax law gives them separate deductions: Rs 40,000 for life, Rs 20,000 for health with a Nepali insurer.

"The 3500 insurance policy" is the government's health insurance, run by the Health Insurance Board, not a life policy. A family of up to 5 pays Rs 3,500 a year for treatment worth up to Rs 1 lakh a year, Rs 5,000 of it for outpatient care, as the Board's clarification was reported in February 2026. Enrolment and the current terms are at hib.gov.np.

A life policy can add a critical-illness rider, which usually pays a lump sum when a listed illness is diagnosed. NIA caps the accident and critical-illness riders at Rs 1 crore each. It helps with costs, but it is not health insurance: it pays once, whatever the bills.

1. 1Decide the cover first, from your debts and your family's spending, then the kind of plan.
2. 2Get two or three quotes for the same sum, age and term, and the benefit illustration in writing: premium, bonus rate assumed, maturity.
3. 3Check the plan on the insurer's website and its NIA identification code; read the exclusions and when the cover starts.
4. 4Fill the proposal truthfully, health and habits included. After 1 year an honest mistake cannot void the claim; a deliberate lie can.
5. 5Name a nominee, and change it after marriage or a death in the family.
6. 6Ask about the grace period and the free-look days in writing; both are set per plan.
7. 7Pay through traceable channels (the insurer's account, app or wallet) and keep every receipt for the tax deduction.
8. 8Keep the policy document where your family can find it, and tell them the insurer's name.