Vanguard (Lagos)

20 February 2013

Nigeria: Why You Need Insurance

When faced with an expected or unexpected accident, you feel a need of security that won't instigate you to beg for money at the eleventh hour. Any king of protection or a safety net is welcomed rather than having nothing.

It is in this light that insurance comes to bear. The importance of insurance as a protection against loss or accident cannot be overemphasised. In advanced nations, insurance has become the most favoured risk transfer mechanism.

What is insurance?

Insurance in the simplest term means you pay a lump sum known as premium, to get a leverage or protection against an accident or loss of a large or small magnitude. So, when the misfortune is encountered, the insurance company can step in, helping you out to sail through the dirt.

Types of insurance

Insurance is broadly categorised into life and non-life or general. Life insurance is insurance on human beings. Though human life cannot be valued, a monetary sum could be determined which is based on loss of income in future years.

Non-life or general insurance on the other hand, includes automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance.

Under these two categories, insurance comes in many forms and types. You can have liability insurance, life insurance or property insurance and much more.

Insurance protection is for you as well as other people - people dependent upon you for one thing or the other. Property insurance is your protection procurement against any damage to your home items like unexpected loss under floods, fire attack or other natural freaks.

All professional persons like doctors, lawyers, get insured for their specific profession under professional liability insurance. In subsequent editions, each of these various types and forms of insurance products and services will be explained in detail.

Nigerian insurance sector

The Nigerian insurance market consolidation was an exercise that started in 2005, culminating in the increase of the industry's minimum capital requirements in 2007. The minimum capital to operate a life insurance business thus increased from N150 million to N2 billion, non-life business moved from N200 million to N3 billion while for reinsurance business, the minimum capital became N10 billion from N350 million.

The consolidation exercise also resulted in reduction in the number of insurance companies operating in Nigeria from 103 to 49 in 2007, and in the case of reinsurance, the number reduced to two from the initial five.

According to the Commissioner for Insurance, Mr. Fola Daniel, many diverse claims such as the victims of severe floods, motor accident, fire accident, to claims emerging from explosions, air crashes, have all tested the resilience of insurance industry.

Similarly, the reinsurance industry has come to the fore in the light of its crucial role in supporting catastrophe risks and in maintaining stability, Daniel stated.

Is it necessary to be insured?

Insurance is actually the fuel, allowing the powerful countries like USA economic engine to keep running. It not only provides you protection, but lends security to all and everybody near you. The amount, paid per month in insurance, keeps the economy floating, ensuring that banks have enough moving cash to keep business and industries running up. Insurance is simply a mutual interest between you and the bank. You get back complete recovery plan and coverage in case of any misfortune, natural or man made.

Can you fight off against an unexpected disaster by yourself?

If you think you can, then that is great; otherwise, insurance is your best shot. Insurance means you do not have to be on the streets, if somehow the main family bread earner passes away, or the roof over your head is snatched or your life savings are stolen. In all these cases, a good insurance is your road to quick recovery.

According to Mr. Yemi Soladoye, an insurance expert, the greatest asset insurance bestows is the absolute peace in case of most traumatic moments of ones life. "A dying man, who is insured for life, would breath his/her last in complete peace, knowing he/she can pass away without fretting over the financial state of his/her family. In automobile accident, you do not lay down in a panic attack, if the vehicle is properly insured. Hence it would be justifiable to claim that insurance brings an extra strength to face the worst upsets of life", Soladoye said.

The way forward

Managing Director of Linkage Assurance Plc, Mr. Gus Wiggle said, "Insurance is an addiction. No matter how much protection it gives against all probable risks; one needs to walk with care, lest he/she is drowned in all the lure and whirlwind of the insurance mania. The market, at present, is full of million types of insurances, so it is hard to figure where to stop."

Wiggle advised that the human life can never be without a risk; hence, the best way to deal with risks is to get insured. "One has to buy protection if not for himself/herself, but for the family- that is why insurance structure exists and functions in the world", Wiggle said.

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