What you need to know about life insurance

aschael Egerue, managing director, Afribank Insurance Brokers Limited and an insurance expert of over two decades, in this interview with Modestus Anaesoronye, outlines the benefits of life insurance to individuals and the society. Excerpts.

Consider a life insurance today The benefit of life insurance is in several respect and we start from the individual, which is a basic component of the society. By taking life assurance, the individual assures his estate or dependants that should anything happen to him they would have something to fall back on.
Should you also be alive, you have something to fall back on. That alone in a country like Nigeria where there is no social welfare scheme, where there is no plan for the aging, is a lot of advantage for any with life assurance.
Now, you talk of mobilisation of funds through life assurance. Cheap funds are mobilised by life insurance companies and these are cheap deposits in the sense that the multiplier effect of the deposits far outweighs the little interest that is paid on what is declared on the policies.
These deposits are mobilised and channelled into a lot of areas, such as estate development and other long-term investments.
Getting an insurance policy
Basically, when you want to take a life insurance policy the first step is to approach your broker, your agent or go directly to the insurance company. What is required is one: your interest in taking a life policy, and secondly, be prepared to declare your health status to let the insurance company know the state of the person’s health, which determines the premium to be paid and collected in case of any eventuality.
This can either be by mere deceleration if the sum assured is small or through medical examination. And once you have done the medical examination and the result is okay, the insurance company goes ahead to issue and explain to you the terms of the policy, and it starts running.
Amount for life insurance policy
As it is said, there is no specific value for life unlike property insurance, where over insurance is morally hazardous. On life, if you can afford to take a life policy of N1 billion and comfortably pay the premium, nobody questions why you are doing that.
So, there is no limit to how much you can take. If what you can afford is N5, 000.00 for 10 years, that is okay and if your salary improves you can also take life polices in addition to this or expand the one you already have.
Life insurance in Nigeria
Despite a number of advantages to individuals and the society, as well as the contribution of life premium to the economy in terms of mobilisation of fund for long-term economic development, life insurance has not fared well in this country at all.
There are a number of reasons why it is so and therefore, we look at it from various perspectives.
On the target market, there are people who should to take the life cover, why are they not taking it?
There are some people whose reasons are largely religious and for such, “it is God that gives and it is God that takes” and so they would not want to intervene personally by taking life assurance.
There are others too who are acting out of ignorance. This group are ignorant of the benefits of life insurance and since they don’t know, they have nothing to do with it. There are also others who are mentally biased because of their source of income. In our society today, some people come into cheap money and because of how they made their money they think it will continue to flow ceaselessly, and as such, life policy is nothing to consider.
When you tell them to save through life insurance for a period of 10 years, they tell you it does not worth their while. This is not made better because we have a currency risk here and so the naira has not been appreciating as it should, so, it makes it somehow unattractive for many people to take the policy, amid alternatives.
There are also another set of people who see it from the angle that the premium is expensive. Their argument is that there is a lot of bias in the actual computation of the life of a black man, because of the presumption that life is very hazardous here and that people can die easily.
So, the premium rate here tends to be higher than normal because the life expectancy here tends to be lower, which is a constraint. Again, people believe that there are other alternatives instead of life insurance. Life insurance is competing with real estate, money market, capital market and all that, and so people have choices on where to put their money.
These are some of the competing factors with life insurance that have made it stagnant.
I think what is necessary is that all the stakeholders, particularly government, should have high interest in the development of the life market because the fund from the market is very durable.
Look at what has happened to the pension sector. Who knew that within this short period of pension reform, the sector would be able to mobilise as much as N900 billion in assets?
Nobody also knew that such money was in this country and life business could as well do so.
This money is not going outside this country; it would be used to finance venture capital issues and other long-term investments.

BY: Modestus Anaesoronye