Many Policyholders Don’t Understand Their Insurance. Here’s What to Check Before Buying

Kathmandu – More people in Nepal are buying insurance, but many do not understand what their policies actually offer. Policyholders are often unsure what benefits they are entitled to, when claims are payable, and why claims may be rejected. The result is disputes during claim settlement, unmet expectations, and policies abandoned before maturity.

Insurance protects against financial risk, and products such as life, non-life, health, agriculture, livestock and microinsurance help individuals and businesses manage different kinds of loss. But buying a policy on an agent’s word alone, on a friend’s recommendation, or on promises of high returns often leads to problems later.

The first step is to work out what you actually need. Family responsibilities, income sources, age, health and future financial plans should all shape the choice. A policy bought only because an agent suggested it or a neighbor owns one can become a burden to pay for and a disappointment to claim on. Just as important, read the terms rather than relying on the sales pitch. The written provisions in the policy document outweigh anything explained verbally during the sale. Buyers should understand the risks covered, exclusions, waiting periods, claim procedures, premium deadlines and the circumstances in which coverage ends, and put anything unclear to the insurer through official or written channels.

Literacy gaps are most visible in life insurance. Many buyers do not know how many years they must pay premiums, how long the policy runs, what they will receive at maturity, or what happens if they stop paying early. Some assume their money will double after a fixed period. In reality, benefits depend on the policy type, sum assured, bonuses and other conditions, and plans do not all offer the same returns. Affordability matters too. Premiums should be set at a level your income can sustain, because over-committing makes instalments hard to pay and may force you to stop. A policy surrendered before maturity may pay out less than the premiums already paid, so the financial consequences should be understood before making that decision.

Health insurance calls for similar care. Buyers should check which illnesses and treatments are covered, how hospitalization, surgery, medicines and tests are treated, and the maximum amount payable. Some policies do not immediately cover pre-existing conditions or certain treatments, so waiting periods and exclusions need close attention. Accurate disclosure is essential as well. Giving false information or hiding medical details on an application can lead to a rejected claim later, since applicants are responsible for providing complete and truthful information. Once the policy is issued, they should check the document against what they submitted and request corrections promptly.

The same principle applies in non-life insurance. For homes, vehicles, industries, businesses, crops and livestock, policyholders should know which risks are covered and how to claim after a loss. Third-party motor insurance, for example, does not automatically cover damage to your own vehicle, unlike comprehensive cover. Those buying home or property insurance should confirm whether fire, theft, natural disasters and other losses are included. In agriculture and livestock insurance, it is important to know the coverage period, how losses are assessed, which documents are needed and the deadline for reporting damage. If livestock dies or crops are damaged, late notice to the insurer or its representative can complicate the claim. Holding a policy is not enough; you must also know how to use it.

Buyers should not rely entirely on an agent for plan details. Terms and benefits can be verified directly with the insurer through its website, branch offices or customer service centers. It is equally important to get official receipts for premium payments and to use authorized payment channels.

Poor knowledge of required documents and procedures is another common cause of trouble at claim time. After an accident, death, medical treatment or property damage, the insurer must be notified within the period the policy specifies. Required documents, such as evidence of the incident, medical bills and police reports, vary by insurance type, so policyholders should learn the claim process when they buy the policy, not when they need it.

The Nepal Insurance Authority regulates and supervises the sector, working to make insurance business more organized, transparent and reliable. Policyholders who are dissatisfied with a company’s service or are in a claim dispute should first complain to the insurer. If the matter is not resolved, they can take it to the Authority through its grievance-handling mechanism.

Insurance is financial preparation made in advance, not something to consider after a loss. A policy bought without understanding its purpose, coverage and benefits creates confusion rather than protection. Growing the number of insured people is not enough; policyholders must also understand their rights, responsibilities and benefits at every stage, from choosing a plan and paying premiums to making a claim.