What is the concept of Insurance in Nigeria? Insurance, in simple terms, is an important tool for managing financial risks-provide protection and make the economy stable. However, in Nigeria, the idea of insurance is still growing up, and now it’s gaining more roots in personal and commercial life.The guide below also goes into detail on what insurance really means in Nigeria, its very purpose, and its effects on both individuals and the economy.
What is the concept of Insurance in Nigeria?
Insurance is the contract between an insurance company (the insurer) and an individual (the policyholder). The insurance company will agree to compensate the insured for certain losses, damages, or liabilities, as defined by the insurance contract, in exchange for a payment, usually paid at regular intervals, otherwise known as premiums.
In simpler terms, insurance is the financial safety net. In case a fire damages your house, for instance, this insurance policy would pay the costs of repairing or replacing the fire damage, thus saving you a financial burden of considerable magnitude.
Read more on: How does Insurance work?
Key elements of Insurance in Nigeria
Insurance coverage in Nigeria has major elements:
Premium: The amounts to be paid by the policyholder to have the insurance coverage, which can be monthly, quarterly, or even annual premiums.
Policy: Legal document that covers terms and conditions of the insurance agreement.
Coverage: This is the specific risk or event the insurance has covered.
Claim: Application by the insured to the insurer for payment because of an contingently covered event.
Insurance is more than just compensating financial losses. There is something broader in perspective, such as personal financial planning and the whole economy development of the nation.
The Purpose of Insurance in Nigeria
Insurance is more than just a means to provide financial recompense for suffering losses; it serves also a wider function in personal financial planning and indeed broader economic development goals in the country.
1. Risk management:
Life is essentially full of uncertainties such as accidents, illnesses, and disasters. Insurance aids the individual and business in managing such risks to cover individuals, family and business finances to unexpected events.
2. Encourages Savings and Investment
Some insurance products such as life insurance and annuities, perform the dual role of being savings or investment instruments. These encourage long-term financial planning by guaranteeing returns in addition to protection.
3. Promotes Economic Stability
Financially speaking, it can be said that the insurance economy underwrites protection for the individual and his asset in the moment of risk. These are nothing but recovery of an established business from losses so that its operations continue and with it, such contribution ultimately leads to economic growth.
The contribution of insurance to the economy of Nigeria
In a country like Nigeria that has a very diversified economy but also one that suffers from strong economy challenges like inflation and insecurity coupled with naturally disastrous phenomena, insurance has become a vital force in stabilizing economies.
1. Providing a Safety Net
Insurance is a form of safety for individual households and organizations; for instance, farmers may be covered against drought or pest destruction of crops, so they can survive another bad farming season financially.
2. Boosting Business Confidence
Companies have insured their properties against risks of theft, fire, and other sorts of business liability and continued presence. They concentrate now on growth and not on niggling worries about what might happen in the future.
3. Attracting Foreign Investment
A robust insurance industry is a great paradigm of economic stability that lures foreign investments. Such an environment would attract investment by reducing the risk of doing business in the economy.
4. Jobs Creation
The insurance industry is creating jobs for thousands of Nigerians, from sales agents to claims adjusters.
Functions of Insurance
In fact, insurance is doing many things-all special functions for different policyholders.
Read more on: How many Insurance are in Nigeria?
1. Protect against risks
Insurance is mainly to reimburse losses due to risks. Like in case, health insurance may be used to pay bills in hospitals. Property insurance may be used to indemnify an insured for damages suffered on account of flooding or fire.
2. Risk pooling
The idea of insurance is risk pooling. Premiums collected from the many policyholders would be sufficient to settle claims of the few who suffer a loss. This collective activity thus makes affordable all to be financially protected.
3. Legal requirement
Some insurance typings, third-party motor insurance, are mandatory in Nigeria. This addresses the issue of all drivers potentially having at least the basic coverage in damage to third parties.
4. Promoting Social Security
Insurance in this aspect would create social stability. It lessens shocks caused by unexpected events or calamities. This enables families to continue with their normal life patterns even after the death of the head of the family or during a medical emergency.
Importance of Insurance
Insurance is important, especially for a country that has its own peculiar forms of issues like Nigeria.
1. Financial Protection
Insurance protects an individual against unexpected expenses. If you involve in a car accident, motor insurance can assist you in covering the liabilities incurred by another or repair.
2. Peace of Mind
It grants the person peace knowing he is protected financially. Health or property or life, picture those two or all of them, insurance brings you and your loved ones security.
3. Protecting valuable possessions
Insurance gives relief to its owner from potential loss, loss through theft, natural disasters, or accidents. Such valuables may be a home or house, car, or business.
4. Encouraging Financial Discipline:
It really helps to instill discipline in your finances; for paying regular premiums, it requires putting some amount aside for insurance.
Insurance Historical Origins
Origin of Insurance is a centuries-old concept. The current form of insurance was born after the Great Fire of London in 1666 when more than 30,000 houses were burnt down. Nicholas Barbon, who was a remarkably original economist, set up a company in building insurance as a way of helping people overcome the long-term effects of such disasters.
This idea finally extended to life and health, marine insurance, and so forth. Insurance is now a global business, and indeed subsisting in Nigeria continues to grow and develop according to local needs.
Frequently Asked Questions (FAQs)
1. What are the different types of insurance in Nigeria?
In Nigeria, common types of insurance include:
Life Insurance: This type provides financial benefit on the occurrence of death of the policyholder to the beneficiaries.
Health Insurance: This will take care of healthcare costs covering treatment of diseases, injuries, and preventive care.
Motor Insurance: Used to cover damages and liability incurred as a result of operating vehicles.
Property Insurance: Protects against loss or damage to buildings and contents.
Travel Insurance: Provides some measure of protection for travel, while travelling within or outside the country.
Agricultural Insurance: Takes care of events that affect farmers like failure of the crop, death of livestock, etc.
2. How do I know which insurance policy to choose?
Polices are selected based on the following:
Your financial requirements and risks (Health, property, and life coverage).
The image and trustworthiness of the insurance company.
Ability to pay the premium and the cost of premiums.
The process of making claims and customer services of the insurer.
3. How does insurance claims work?
In making an insurance claim, you have to notify the insurance company of any events it covered against, like accidents and damages. You will then need to produce some documents, like a police report for theft claims or medical bills for health claims. Claims, once verified by the insurer, will trigger compensatory action as per policy terms.
4. Is the cost of insurance expensive in Nigeria?
Insurance pricing varies depending on the individual type, coverage, and insurer, among other factors. Most companies, however, offer affordable options for both individuals and businesses, bringing the cover within reach for many.
5. What happens if I miss a few premium payments?
Missing payment premiums may lead to cancellation of the policy or denial of coverage. While some insurers provide a grace period, it is advisable that a member maintain consistency in premium payments in order not to lose the financial protection.
Real-life Examples of Insurance Benefits
1. Health insurance in action
Mrs. Ade, who teaches in Lagos, signed up for a health insurance scheme, and when she was diagnosed with diabetes, her insurance took care of the cost of all her treatments, thereby relieving the financial burden on the entire family.
2. Motor insurance
His car got smashed during a collision between Mr. Obi’s car and another car. But luckily for Mr. Obi’s continued comprehensive motor insurance, it was repair fees paid as well as compensation offered to the other driver which made his life easier without spending a dime.
3. Business Insurance
Insured against fire with the little shop in Abuja, the small businessman managed to get compensation to rebuild his shop and get it working again in a matter of months when such an event occurred.
Conclusion
Insurance in Nigeria is more than a financial product; it is a very important risk control mechanism for protecting assets and economic stability. Insurance can cater to individual requirements on a personal level, or fit into a general business insurance program, thus offering risk management solutions to the organization.
As tempting as it may sound, visiting a place doesn’t mean that it will provide you with ample knowledge about the insurance, but if you know the significant objective, benefits, and working knowledge of insurance, then you will make a well-informed decision for securing the future financially. So go ahead and take a leap. There are so many options available to protect you and your family as well as investments.
Leave a Comment