Kathmandu. Although awareness about insurance has increased in Nepal in recent years, it seems that a large number of people still do not have access to insurance. This makes it clear that insurance regulators and insurers need to increase insurance awareness by conducting more awareness programs.
In Nepal, some people have a wrong opinion about insurance. Even if they understand insurance, they are reluctant to buy insurance.
The Nepal Insurance Authority (NIA) also releases various programs and awareness messages from time to time to raise awareness about insurance. However, it still seems that it is not enough.
The Insurance Authority of Nepal (ANI) has issued a warning message on its website to explain the misconceptions and realities related to insurance.
Insurance Myths and Realities
Confusion: Insurance is a means of making a profit.
{{TAG_OPEN_span_32}Reality: Insurance is not a means of making a profit. It is a protection against unforeseen risks that may occur to insurable people or property. Insurance protects people and property through risk diversification as a means of compensating for damages. For example, if the insured dies, the family is given financial compensation. It motivates the family to recover from the loss, not make a profit. In another example, insurance companies pay compensation if property is damaged in an accident, including fire.
Confusion: All persons and property can be insured.
Reality: Only insurable individuals and property can be insured legally. On the other hand, there must be an ‘insurable interest’ between the insured and the proposer in order to be insured. For example, a person cannot insure someone else’s children or another’s property. Because the loss of another’s property does not cause direct harm or damage to the person and is not related to that property or life.
Confusion: More money can be made by insuring the property with multiple insurance companies.
Reality: This is not possible. Only the amount of actual damage to the property is received as a claim from the insurance. If there is non-life insurance in more than one company, then all the insurers will pay the claim in their own proportion. Thus, the total claim amount cannot exceed the amount of damages. Therefore, it is not possible to get more money by claiming insurance in more insurance companies.
Fallacy: TAG_CLOSE_span_27 Insuring property is a waste of money.
Reality: Insurance is not a waste of money, but to protect the risk to the property as it may occur at any time. In this way, insurance encourages people to compulsorily pay the insurance premium to the insurer every month or year. This helps in maintaining financial discipline. Accidents, fires, thefts, natural disasters are unpredictable. These events cause a huge financial loss on the property. Insurance is a protection against such losses.
For example, a fire broke out in one person’s house for some anticipated reason. Now, it will cost around Rs 50 lakh to rebuild the house. If the person had home insurance, the compensation provided by the insurance company would have made it easier for him to rebuild his home. But if he didn’t have insurance, he could lose his lifetime savings, take out a loan, or go homeless. Insurance is not a waste of money, but a way to avoid risk.
