Many households are oblivious of the important role insurance plays in protecting them from major life’s risks. From medical insurance to life insurance, insurance is yet to find acceptance among many, especially in Africa.
Anyone looking to protect their family, possession and themselves from financial risk or losses will find insurance plans to be helpful. Insurance plans assist people in paying for unexpected medical expenses, hospital bills, the contracting of any illness and their treatment, as well as any future medical care that may be required.
Nigeria’s insurance market is ranked 62nd in the world, with $1.64bn in premia collected in 2018, or 0.2 per cent, of total collection worldwide. The industry’s gross premium report currently stands at N520.1tn, according to Augusto & Co’s 2022 insurance industry report.
From a struggling industry, insurance has developed into a growing force. The Nigerian insurance sector brought in N520.1bn in gross premia for the fiscal year that ended on December 31, 2020, according to Agusto & Co., a pan-African credit rating agency and a major source of industry research and knowledge in Sub-Saharan Africa.
The report noted, “The lockdown following the Coronavirus Disease negatively impacted insurance products distribution, especially with the inter-state travel bans on movement of people and goods.”
It also stated that the industry paid out net claims of N196bn, up by 20 per cent year-on-year, representing 37.6 per cent of Gross Premium Income in the 2020 financial year.
The Executive Secretary/Chief Executive Officer, Nigerian Council of Registered Insurance Brokers, Tope Adaramola, had said, “The insurance industry has grown over the years, though we are not yet there. The total contribution of the industry to the Gross Domestic Product is still poor. This is a challenge to Nigeria when compared to other advanced countries like the United States and United Kingdom, even in African countries like South Africa, Egypt and Kenya.
Insurance policies can help to offset the family’s financial loss caused by the untimely demise of the family’s breadwinner. The insured person’s family can also pay off any debt accrued during their lifetime, such as home loans.
In the event that the family’s primary provider passes on in the future, insurance plans help the family maintain their standard of living. This will assist them in paying for household expenses through the lump sum insurance payout. In addition to providing coverage for all expenses in the event of the policyholder’s death, accident or medical emergency, insurance money also gives the family some much-needed breather.
The security of children’s educational future is one of the many advantages insurance plans offer. The plans make sure that the children are financially secure while pursuing their dreams, without any compromise, even if the insurer is not around.
Along with regular coverage, many insurance plans also offer savings and investment options. The insurer’s regular investments aid in creating wealth or saving for the future. This comes as premium, of which a portion is used for life insurance and the other for either an investment or savings plan, depending on one’s future needs and goals.
In the event of any unforeseen disaster or damage, insurance helps to protect homes. The home insurance policy aids in obtaining coverage for house damages and pay for repairs or rebuilding, when necessary. If the insurer covers valuables and items inside the home, they can use the insurance premium to replace lost or damaged items.
Importantly, by ensuring process stability, insurance makes a significant contribution to the general economic expansion of the society. By enhancing financial resources, the insurance industry creates financial institutions and lessens uncertainty.
Numerous incidents have shown that insurance can benefit people, households and economies in the following ways.
In business and in everyday life, insurance offers financial support and lessens impact of unforeseen risks. It offers protection and security from specific occurrences. There is perpetual worry about unexpected loss. Insurance offers protection from any unforeseen loss. For instance, in the case of life insurance, the insured’s family is given financial support upon their passing. In the case of other insurance, protection is given against loss from accidents, fire and other disasters.
Life insurance and life assurance are forms of protection designed to pay out after the passing of the policyholder – but they don’t work the same way. While life insurance is designed to cover the policyholder for a specific term, life assurance usually covers the policyholder for their entire life.
With the premia collected, insurance generates revenue. Government securities and stocks are purchased with the funds, which are profitably used for a nation’s economic development to raise additional funds. Large investments that result in capital formation and increased job opportunities.
Along with risk reduction and unexpected event protection, insurance provides a means of investment. Life insurance enables systematic savings due to payment of regular premium. Life insurance provides a mode of investment. It develops a habit of saving money through premium payment. The insured gets the lump sum at the maturity of the contract. Thus life insurance encourages saving.
Insurance stimulates domestic savings, which has a significant impact on the economy. Insurance creates profitable investments out of accumulated wealth. It enables loss mitigation, financial stability, and trade and commerce activity promotion, all of which contribute to economic development. As a result, insurance is essential to an economy’s ability to grow sustainably.
Medical insurance is thought to be crucial for controlling health risk. Critical illness can strike anyone at any time, and without warning. Additionally, rising medical costs are a major worry. One of the insurance plans that cover various health risks is medical insurance. In the event of a medical insurance policy, the insured receives medical assistance.
Insurance makes it easier for risk to be transferred from the insured to the insurer. The fundamental idea behind insurance is to distribute risk among a lot of people. Many people purchase insurance policies and pay the insurer premia. Whenever a loss occurs, it is compensated out of funds of the insurer.
“Having insurance makes life easier for everyone, especially if you have a family. You avoid the stress of unexpected spending, and your risk is effectively managed. You are guaranteed the best care with your health insurance,” according to Mr. Adeleke Adeshina, a medical insurance subscriber in Nigeria.
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