How does Life Insurance work in Nigeria?

The unexpected will surely happen, no man will escape it. Accident can happen, life is not predictable. You may predict your future but what you you don’t know for sure is how it would plays out entirely. No matter how much control you’ve got over your life, the unexpected can still happen.

One of the major things to do in order to secure the future of your loved ones when you die is to sign up for a life insurance coverage. Life insurance coverage is one of the rewarding financial decisions to make in life. In this article, we will guide you on some categories of life insurance and why you need one.

Term life insurance


This is considered to be the most affordable life insurance out there. When you register for term life insurance, the policy is usually purchased for a specific period of time, and if you die within the year stated on the policy agreement, the insurance company will pay the amount stated on the policy agreement to your children or your beneficiaries.


In term life insurance, policy agreement is usually between the pace of 1 -30 years. Term life insurance coverage can be renewable, usually yearly renewable and it is the best choice for those who need insurance coverage for a specific period of time. Usually within the period when your children or beneficiaries are still under age or young and when they are grown up or finished university.

Permanent life insurance


This type of policy mandates that you pay for your insurance coverage for as long as you live and the insurance company will compensate your children or your beneficiaries the value of your policy coverage when you die. permanent life insurance are of three major types, whole life insurance, Universal life insurance and Variable life insurance. Let’s talk briefly on each of them.

Whole life Insurance


This is the type of permanent life insurance in which the premium remains the same as long as the policy remain active. The premium does not change, the insurance company expects you to pay the same amount of money for as long as you live. Sometimes you will even discover that the amount of money you have contributed through paying premium will be valued more than the risk in the policy. Sometimes the insurance company will even give you the option of borrowing money out of your accumulated premiums.

Universal life insurance.



Under universal insurance, you have the same kind of coverage as in whole life insurance but the universal permanent life insurance goes one step further. You have the freedom to restructure your policy the way you like. You can even structure your policy in a way that it will cover your entire premium. But the structure can only be possible when you have contributed enough premium in your cash value account that can cover more than your entire premium.

Variable life insurance


This is a type of permanent life insurance coverage in which you receive the same death protection like other permanent life insurance coverage but then you have control over how you invest your money. You have the option to invest your money elsewhere, it can be be in the stock market or even in the money market industry. One disadvantage here is that when your investment do not perform well, the value of your insurance coverage will drop.

Contract limitations under life insurance


There are some fees and charges associated to life insurance coverage in Nigeria. Here are some expenses related to the coverage. You may want to consider these expenses before you sign up for life insurance.

  • Mortality and expense charges
  • Account fees
  • Underlying investment management fees
  • Administrative fees and
  • Charges for optional benefits.

Why you need Life insurance coverage In Nigeria

  • To take care of any outstanding loan or debt such as home loan, car loan or even personal loan when you die.
  • You will no longer worry much about your financial future and you can have peace of mind knowing that your tomorrow is secured.
  • Funerals can be quite expensive in some part of Nigeria, your family doesn’t have to worry much over your funeral ceremony.
  • Permanent life insurance policies can accumulate a cash value over a period of time. You can borrow from your accumulated premiums with no tax incurred if your other investments fall short. Indirectly, you can use the borrowed cash to fund your business or your retirement dream

Conclusion


Life insurance is very important to everyone regardless of your class in the society. There are many insurance policies out there. But you have to choose an insurance policy that best serve your purpose even in your death. For those of you that may consider borrowing money from your accumulated premiums, make sure you invest the borrowed money wisely because any withdrawals from your account reduces policy benefits and values.

Related Article: Insurance Premium In Nigeria and How it works

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