Agricultural systems in Nepal are heavily reliant on favorable climatic conditions, making them sensitive to climate change. Agriculture has always been a risky business in the country since it is constantly affected by natural disasters such as droughts, floods, storms, landslides, weeds, unpredictable rainfall, and a variety of other issues. Natural catastrophes frequently cause farmers to cause tremendous losses as a result of crop destruction. Disease outbreaks are a huge setback for farmers who work in the livestock and poultry industries. Every year, agricultural pests wreak havoc on crops such as paddy, wheat, maize, ginger, and cardamom, among others. Agriculture's commercialization can only inspire young people, who come from farming families, to pursue careers in agriculture. Agriculture insurance, if implemented correctly, can encourage individual's youth in the field of agriculture. It is a contract between insurance firms and smallholder farmers in which the latter pays the former risk premiums in exchange for ensuring their crops and/or livestock. This method ensures and protects the farmer's cash compensation if the insured commodity is damaged or lost, whether due to climate-related hazards or other factors beyond his or her control. Agricultural insurance is an important part of the good risk management plan for farmers. Non-life insurance companies have established distinct farm insurance divisions to carry out and specialize in two areas for this sort of insurance business:

a)     Crop insurance; b) cattle, bird, and poultry insurance

Agriculture insurance development in Nepal began in 2013 (2069 B.S.) with the release of a Directive connected to state premium subsidies for crop and animal insurance. According to Beema Samiti, all non-life insurers must offer and issue several sub-types of agriculture insurance policies that fall under the broad categories of livestock and crop insurance.

The following risks and perils are covered by the policies:

 1)fire, lightning, earthquakes, flooding, landslides, drought, storm, hailstorm, frost, snow, unexpected or accidental external forces, disease, and illness which will cause harm to crop.

 2) additional insurance for crop loss caused by pests, and insect

3) additional insurance for fish damage caused by a lack of oxygen and ammonia, or death due to poisoning.

A major challenges for the implementation of crop insurance is given below.

1)    In Nepal, 80 percent of the population lives in rural areas that are difficult to reach and lack the infrastructure needed to obtain agricultural insurance.

2)    Lack of public confidence in the farm insurance sector and lack of awareness about agriculture insurance among low-income segments.

3)    Inadequate auxiliary services, such as agriculture technicians, weather stations, and others, due to a lack of suitable human resources in rural areas.

This program benefits low-income farmers and their communities in particular, as well as encouraging more crop investment.