Life Insurers Increase Policy Loan Interest Rate by 20 pc Point

Kathmandu: Life insurance companies have increased the interest rate of policy loans by 20 percent points amid the increasing fixed deposit interest rate among bank and financial institutions(BFIs).

The BFIs are offering interest rate upto 14 percent on fixed deposit including double of principal amount within 5 years. The life insurers have increased the interest rate based on their findings that the demand of policy loan has surged due to interest rate difference between life insurers and BFIs. The policyholders used the loan amount the make investment as fixed deposits in the BFIs.Though it is beneficial for both parties, the life insurers are forced to increase the interest rate for the sake of majority of policyholders.

Earlier, life insurers have been providing loan to their policyholders at interest rate from 10-11 percent. The interest is payable semi-annually. Failure to pay the interest semi-annually will result compounding interest.

According to the Life Insurance Policy Guidelines 2078, a policyholder can obtain loan against the collateral of life insurance policy after the payment of three annual installment and completion of three years from the date of commencement. The residual income from the policy loan is supposed to be deposited in the life fund which ultimately benefits the policyholders.

According to the Insurance Board, life insurers have disbursed above Rs. 60 billion against the surrender value of life insurance policies.

It has been learnt that life insurers have increased the interest rate following their verbal agreement under the umbrella of Jiwan Bimak Sangh Nepal. Sangh is the apex body of the life insurance companies.


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