Nigerians severely underrate insurance policies and services. The majority of the population does not care about any form of insurance, while many don’t understand how it works.
Due to this, many are missing out on basic benefits and advantages insurance services offer them. Figures by Leadway Assurance estimate that only 0.5% of Nigerians have insurance with a penetration rate of less than 1 percent.
However, Statista reported that the Insurance market in Nigeria is projected to reach a market size (gross written premium) of US$8.12bn in 2024.
What is insurance?
Insurance is a type of contract represented by a policy in which a policyholder(Individual or a business) receives financial protection against losses from an insurance company.
That is you go into a contract with the company to help protect you and your family from unexpected financial losses that may be due to an accident, illness, natural disasters, and others depending on the agreed plan.
An insurer refers to a corporation that promises to reimburse you. The insured (also known as the assured) receives the payout, with the exception of life insurance, which is paid to the beneficiary indicated in the contract.
To make you understand better, in any case of an emergency, the insurer reimburses for damages caused by specific events like fire, hurricane, accident, and earthquake.
Premium is the amount paid by the insured in exchange for the insurer’s guarantee to reimburse, which is normally done annually or semiannually. The contract itself is referred to as the policy. The events insured against are referred to as risks or perils.
How does Insurance work?
To make it simple, you(Policyholders) pay an agreed amount(usually weekly or monthly payment) to your insurer(the insurance company). In exchange for the company, the company will pay for all losses covered in the agreement form.
Once you sign up for a plan with a company, you’re bound to enjoy all the benefits until you stop paying premiums or your policy plan ends. It might be a routine visit to your doctor, a car damaged during an accident or your smartphone or home appliances stolen away.
Your insurance company will help pay for the services as long as they’re covered in your plans either by sending you the money or directly paying the service providers. But in certain instances, before an insurer releases the payment, you’ll first need to reach what is called a deductible.
Also in some circumstances, the policyholder is required to file a claim first before any funds are released or in some cases where your service provider would be the one to handle communications with your insurance company.
Types of Insurance for Nigerians
Health Insurance:
Health Insurance policy plans protect your health and give you access to quality healthcare services.
This policy foots the medical bills and expenses of you and your family depending on the agreement. These policies either cover or repay the cost of treatment for any included disease or injury and other wide range of medical bills.
They are mainly two forms of health insurance in Nigeria, Public and private health insurance. ANational Institute of Health (NIH) survey showed that less than 4% of Nigeria’s population has health insurance.
Health insurance policy deals with :
- Inpatient care
- Critical illness treatment
- post-hospitalization medical bills
- Procedures for day-care
- resident care and pre-hospitalization costs.
Disability Insurance:
If you’re unable to work due to illness or an accident, a disability policy will pay a fixed amount or a specific percentage of your wages on a weekly or monthly basis.
Automobile Insurance:
This insurance policy is designed to provide you with financial help to support the event that your automobile is involved in a crash, stolen or damaged. For example, you park your vehicle or bike beside the road and another driver collides with it. If you’re insured you’ll get a new car or it’ll be repaired by your insurance company.
They are three types of Auto-insurance: Third-party insurance, Comprehensive insurance, and Collision insurance.
Homeowners’ Insurance:
A homeowner’s insurance provides full coverage for your home belongings and other important assets against physical destruction or damage. The policy usually covers interior damage, exterior damage, loss or damage of personal assets, and injury that arises while on the property.
That is, house insurance protects you from both natural and man-made disasters such as fire, earthquake, tornado, burglary, and robbery.
The following are examples of house insurance policies :
A) Home Building Insurance:
it serves to protect the house’s foundation from destruction in the event of a disaster.
B) Public Liability Coverage
Protects the insured residential property from any harm caused by a visitor or third party while on the premises.
C) Standard Fire and Special Perils Policy
Protection against fires, natural disasters (e.g., earthquakes, landslides, storms, and floods), and anti-social human-caused activities (e.g., strikes, and riots)
Life Insurance:
Life insurance policies offer protection against unpredicted circumstances such as the policyholder’s death or incapacity. This type of insurance is a legally binding contract that promises a death benefit to the policy owner when the insured person dies.
In this case, you must pay a single premium upfront or pay regular premiums over time and when you die, your beneficiaries receive the policy’s death benefits.
Aside from providing financial security, many types of life insurance plans allow you
to optimize your savings by making recurring payments to various equity and debt fund alternatives.
A life insurance policy is beneficial if you want to protect your family’s financial future against the uncertainty of the future.
The insurance coverage includes a substantial sum that will be paid to your loved ones if something occurs to you. Based on your financial needs, you may pick the length of the life insurance policy, the amount of coverage, and the payment choice. The following are the many types of life insurance policies :
- Term Life Insurance
- Unit-Linked Insurance Plans
- Whole Life Insurance
- Endowment Plans
- Child Plan for Education
- Retirement Plans
Other Liability Insurance
In today’s world where you can be sued for anything: a wrong collision with someone else’s property or a wrong post on the internet. A personal liability policy covers many types of these risks and can give coverage in excess of that provided by homeowners and automobile insurance.
5 Insurance tips to practise in Nigeria
Insurance provides essential financial protection for your future, so if you’re looking to start an insurance policy in Nigeria. Here are a few tips you should know:
1. Assess your risks:
Before you visit any insure, it’s important to know what you need to insure and how much coverage it’ll require to do it. You should also put into place factors like your income, assets, debts, and dependents.
2. Shop smart:
When looking for insurance, your top priority should be to find adequate coverage.Price is important, but you’ll want to determine what kind of coverage you need first.
Then you can fit that coverage into your budget and determine which carrier can provide you with the most comprehensive policy for your situation.
You may be tempted to choose insurance with the lowest price tag, but if you don’t have enough coverage (or the right kind of coverage), you will see less financial benefit when it comes time to file a claim.
3. Look for discounts:
Once you evaluate your coverage needs, factor in your budget and find ways to save. Ask your insurance agent if there are any discounts on your coverage. Often, carriers offer discounts for things like paying your policy in full, staying auto accident-free or, if you’re in school, getting good grades. You also can save money by “bundling” multiple policies, such as purchasing a home and auto policy from the same carrier.
4. Life Insurance is Essential:
Whether old or young, life insurance is one of the most important. Because It can help your family cover unexpected costs in your absence, including student loan debt or a mortgage, in addition to end-of-life costs.
And if you’re blessed with kids and immediate families, a life insurance policy can also support their education or childcare expenses. Additionally, you should always consider long-term disability coverage, which helps you stay afloat financially if an accident happens and you become disabled and unable to work.
5. Treat your insurance like an Investment:
Don’t forget like every major thing in life your insurance is an investment. So learn to treat it as one if you want to fully enjoy the benefits. Like normal funds, the value of these plans fluctuates and is based on the performance of your underlying investments.
The majority of newcomers often look to these policy values in the future as a source of funds to supplement their retirement income.
This means you must continue to make adequate premium payments, especially during times of poor investment returns.
Because paying less than the originally planned value can have a big impact on the cash value available to you in the future.
You should also learn to monitor your policy’s performance and periodically rebalance your accounts to your desired allocation, just as you would with any investment account. This will help ensure you’re not taking on more risk than you had planned when you set up your account.
Conclusion
Insurance services in Nigeria are underutilised considering how less secure properties and life here are in our part of the world. Having a solid insurance policy with your insurer and practicing the tips above can help you navigate the insurance world and set you up for the benefits it offers. However, don’t forget to do your research and be patient enough to know the ins and outs before settling on making decisions.
