Importance of Insurance in Nepal

GP Chudal
0

Importance of Insurance in Nepal

The Why’s: Importance of Insurance in Nepal

Insurance is a contract between an individual or a group and an insurance company, where the insurer agrees to pay a certain amount of money or provide a certain service in case of an unforeseen event that causes loss or damage to the insured. Insurance is a way of transferring risk from one party to another, and it can provide financial protection and peace of mind to the insured and their beneficiaries.

In this article, we will explore some of the reasons why insurance is important in Nepal, a developing country with various challenges and opportunities. We will use real-life stories or examples of insurance saving the day, explain how insurance provides financial security, and discuss the tax benefits of life insurance.

A. Real-life stories or examples of insurance saving the day:

One of the real-life stories of insurance saving the day is the case of Sunita, a 35-year-old woman who lives in Kathmandu with her husband and two children. Sunita works as a teacher in a private school, and her husband runs a small grocery shop. They have a modest income and a simple lifestyle, but they have always been careful about saving money and investing in insurance.

Sunita has a life insurance policy from Nepal Life Insurance Company, which covers her for Rs. 10 lakhs in case of death or disability. She also has a health insurance policy from Sagarmatha Lumbini Insurance Co. Ltd., which covers her for Rs. 5 lakhs in case of hospitalization or surgery. Her husband and children are also insured under the same policies.

Last year, Sunita was diagnosed with breast cancer, which was a devastating news for her and her family. She had to undergo chemotherapy and surgery, which cost her around Rs. 8 lakhs. Fortunately, her health insurance policy covered most of her medical expenses, and she only had to pay a small amount as co-payment. She also received a critical illness benefit of Rs. 2 lakhs from her life insurance policy, which helped her to cope with the loss of income and other expenses.

Sunita is now recovering from her illness, and she is grateful that she had insurance to support her during this difficult time. She says, “Insurance is not a luxury, it is a necessity. It can save your life and your family’s future. I am glad that I invested in insurance when I had the chance, and I would recommend everyone to do the same.”

Another example of insurance saving the day is the case of Rajesh, a 40-year-old man who lives in Biratnagar with his wife and three children. Rajesh works as a driver for a travel agency, and his wife is a homemaker. They have a low income and a lot of debts, but they have always been hopeful about improving their situation.

Rajesh has a life insurance policy from Reliable Nepal Life Insurance Company Limited, which covers him for Rs. 5 lakhs in case of death or disability. He also has a personal accident insurance policy from Shikhar Insurance Company Limited, which covers him for Rs. 10 lakhs in case of accidental death or permanent total disability.

Last month, Rajesh was involved in a road accident, which resulted in severe injuries and paralysis. He was admitted to a hospital, where he had to undergo multiple surgeries and treatments. His medical bills amounted to around Rs. 12 lakhs, which was beyond his capacity to pay. Fortunately, his personal accident insurance policy covered all his medical expenses, and he also received a lump sum payment of Rs. 10 lakhs as permanent total disability benefit. His life insurance policy also paid him Rs. 5 lakhs as disability benefit, which helped him to clear his debts and secure his family’s future.

Rajesh is now wheelchair-bound, but he is hopeful that he will recover soon. He says, “Insurance is a blessing, it can save you from a lot of trouble and misery. It can help you to overcome any adversity and live a dignified life. I am thankful that I had insurance to support me during this tragic time. I urge everyone to get insured and protect themselves and their loved ones.”

These are just two examples of how insurance can save the day in Nepal, where life is unpredictable and full of risks. There are many more stories of people who have benefited from insurance in various ways, such as fire, theft, natural disasters, business losses, etc. Insurance can provide a safety net and a cushion for any unforeseen event that can cause financial hardship or emotional distress.

B. How insurance provides financial security:

Insurance can provide financial security in many ways, such as:

a. Income replacement: Insurance can replace the income of the insured in case of death or disability, which can affect the livelihood and well-being of the dependents. For example, life insurance can pay a lump sum or regular income to the beneficiaries of the insured, which can help them to maintain their standard of living and meet their financial obligations. Similarly, health insurance can pay for the medical expenses of the insured, which can otherwise drain their savings and income. Disability insurance can pay a percentage of the income of the insured, which can help them to cope with the loss of earning capacity and cover their living expenses.

b. Asset protection: Insurance can protect the assets of the insured from damage or loss due to various causes, such as fire, theft, earthquake, flood, etc. For example, property insurance can pay for the repair or replacement of the property of the insured, which can otherwise be costly and time-consuming. Similarly, vehicle insurance can pay for the damage or loss of the vehicle of the insured, which can otherwise affect their mobility and convenience. Liability insurance can pay for the legal expenses and compensation of the insured, which can otherwise expose them to financial liability and lawsuits.

c. Investment and savings: Insurance can also act as an investment and savings tool, which can help the insured to achieve their financial goals and create wealth. For example, endowment insurance can pay a maturity benefit to the insured at the end of the policy term, which can be used for various purposes, such as education, marriage, retirement, etc. Similarly, unit-linked insurance can invest a part of the premium of the insured in various funds, which can generate returns and increase the value of the policy. Pension insurance can pay a regular income to the insured after retirement, which can help them to enjoy a comfortable and secure life.

d. Risk diversification: Insurance can also help the insured to diversify their risk and reduce their exposure to a single source of loss. For example, by buying multiple insurance policies from different insurers, the insured can spread their risk and increase their chances of getting a claim. Similarly, by buying insurance policies with different coverage and benefits, the insured can cover different aspects of their risk and enhance their protection. Insurance can also help the insured to pool their risk with other insureds, and share the cost and benefit of insurance.

These are some of the ways how insurance can provide financial security to the insured and their beneficiaries. Insurance can help the insured to cope with the uncertainty and volatility of life, and ensure their financial stability and prosperity.

C. Tax Saving from Life Insurance:

One of the benefits of buying life insurance in Nepal is that it can help you save tax on your income. According to the Income Tax Act of Nepal, there are various tax exemptions and deductions available for life insurance policyholders and their beneficiaries. 

Here are some of the ways how life insurance can save tax in Nepal:

1. Life insurance premium deduction: 

Life insurance premium paid by a resident natural person is deductible up to the limit of Rs. 25,000 per year. If both husband and wife have opted as a couple, the insurance premium paid can be clubbed to claim for the deduction, subject to a maximum of Rs. 25,000 per year. This means that you can reduce your taxable income by the amount of premium you pay for your life insurance policy, up to Rs. 25,000 per year.

2. Life insurance maturity exemption: 

Life insurance maturity benefit received by the policyholder or the beneficiary is exempt from tax up to the limit of Rs. 500,000 per year. This means that you do not have to pay any tax on the amount you receive from your life insurance policy when it matures, up to Rs. 500,000 per year.

3. Life insurance death benefit exemption: 

Life insurance death benefit received by the beneficiary is exempt from tax up to the limit of Rs. 2,500,000 per year. This means that you do not have to pay any tax on the amount you receive from your life insurance policy in case of the death of the policyholder, up to Rs. 2,500,000 per year.

4. Critical illness benefit exemption: 

Critical illness benefit received by the policyholder or the beneficiary is exempt from tax up to the limit of Rs. 100,000 per year. This means that you do not have to pay any tax on the amount you receive from your life insurance policy in case of a critical illness, such as cancer, heart attack, stroke, etc., up to Rs. 100,000 per year.

5. Disability benefit exemption: 

Disability benefit received by the policyholder or the beneficiary is exempt from tax up to the limit of Rs. 100,000 per year. This means that you do not have to pay any tax on the amount you receive from your life insurance policy in case of a disability, such as loss of limbs, eyesight, hearing, etc., up to Rs. 100,000 per year.

These are some of the ways how life insurance can save tax in Nepal. By buying a life insurance policy, you can not only protect yourself and your family from financial risks, but also save tax on your income and increase your savings. Life insurance is a smart investment that can provide you with multiple benefits and advantages.

Your reaction on this article:


Categories:

Post a Comment

0Comments

Please leave your comments or ask your queries here. The comments shall be published only after the Admin approval.

Post a Comment (0)

#buttons=(Accept !) #days=(10)

Our website uses cookies to enhance your experience. Check Now
Accept !
Join Our Telegram Group