If you live in a free market society such as ours then at some point buying insurance will become almost unavoidable. It really doesn’t matter whether you are an employee or an employee insurance is either mandatory or obligatory at some point. In view of this, I have made a list of 10 important things you must consider before buying Insurance.
1. Never Buy Insurance for what you can afford – This is like a common rule really but it is often overlooked in this world of increased marketing pressure from friends and family. Now what does this mean? There is no point buying insurance for example your phone or a TV as this are considered consumables and things that are easily replaceable. Insurance should be for Assets you can not easily afford to replace. For example, a car that cost you a lot of money to buy or one that you borrowed money from a bank to buy should be insured because if it gets stolen or get heavily ‘accidented’, it may be difficult for you to replace it. Same goes for a house.
2. Buy Insurance when it is statutorily required – The government statutorily requires that we take out insurance. Some affect companies whilst some affect you as an individual. Identify what they are and abide by the rules. The cost of not doing so is a penalty that is sometimes more than the cost of insuring.
3. Life Insurance is mandatory for Government Employees – Life Insurance Policy is mandatory for Government workers (Civil Servants) and the military according to Section 9 subsection 3 of the Labour Act. Therefore, if you are a civil servant the Government should be contributing a life insurance policy for you. It is therefore up to you to find out the value of the policy and who the beneficiaries are upon your death. If you feel it is not adequate, you can contribute voluntary too.
4. Employee Compensation is mandatory – The Government some years back passed the Employee compensation act. Here employees of all works of life are mandated to contribute 1% of their Payroll as insurance for to employees with compensation for Injury in work place, mental stress, occupational hazard, and even death. This is valid so long as you are in employment.
5. Motor Third party insurance is mandatory – Motor vehicle insurance is mandatory so long as it is a third party insurance. In other words, should you decide not to insure your car, you must buy a third party insurance to cover damages made to other cars should you be involved in an accident. As mentioned above, if your car is a rickety one then a third party insurance is probably just fine. If your car is expensive then get a comprehensive insurance. With a comprehensive insurance you need not buy a third party insurance as that is usually included in the cover. Comprehensive Motor Vehicle Insurance is typically not more than 5% of the value of the car.
6. Get a life insurance company when you have loved ones who depend on you financially – If you are single and don’t have any dependant relative, then buying a Life Insurance is a waste of money as far as I am concerned. In fact, you have a rich spouse and have a fortune already in place for your family then there really is no point buying a life insurance. This is because, you buy Life Insurance because you want to make sure your family or people who depend on you for survival will not suffer if you happen to die. Since you do not want them suffering when you die, you protect them by taking out an Insurance.
7. Health Insurance can save you a lot of money – Health Insurance is available in Nigeria and can save you a lot of money when you fall sick. For as little as N100k per annum you can buy health insurance for common illnesses for a Family of four. Now, consider that illnesses like malaria, typhoid, sore throat etc are common in Nigeria and can occur when times are hard, having an insurance cover for them is key.
8. You can only Insure your interest on an event – Section 56 subsection 2 of the Insurance Act allows you to for example buy an insurance for a show or a wedding or an event that has value to you. However, you can not make claims if you do not have an insurable interest in the event. As above, if you do not have any beneficial interest in a show and you took out an insurance on it, you will not get claims should the show defaults.
9. You can’t take out a life insurance on someone who you do not have legal interest on – You cannot buy a Life Policy on someone who is not legally bound to you. For example, you can only take out a Life Policy for your Spouse or dependant relative as recognised by law. You cannot take out a life policy on your girl friend or pastor or village head. It won’t fly. Section 56 of the Insurance act explains further.
10. Your Insurance Company won’t pay claim? just apply to the Commission – If you have applied for claims and have received an Insurance discharge voucher, the Insurance Company is mandated to pay your claims within three months. It is 7 days for a Life Insurance policy. If you don’t receive claim within this period, you can apply to the National Insurance Commission to pay you the claim directly from the reserve they hold on behalf of the Insurance company