Life insurance and the fear of death

This year alone, I know a handful of people in their 40s and 50s who have died. Take any day of your choice and go through all the newspapers; you are likely to find an obituary of somebody within this age range. The cause of death might range from accident and illness to death from armed robbery or kidnapping. Our country is going through precarious times and life has become more uncertain. Insurance is about insuring these uncertainties. If the uncertainties we currently face in Nigeria were to be experienced by people in advanced countries, the demand for life insurance would have soared by now. But many Nigerians do not want to hear anything about life insurance or life insurance products that remind them that they are mere mortals.

A female marketer narrated her experience with a proprietress of a school. She went to sell an insurance product that takes care of the school bills of students if their parent/sponsor/guardian dies. “I reject it in Jesus name,” the proprietress screamed.

“Nothing shall happen to the parents of my students. They shall live to enjoy the fruits of their labour…” she continued ranting, sorry praying. When she was done, she practically chased the female marketer out of her school. I say amen to her prayers.

But those people in their 30s, 40s and 50s, who are dead, are some of them not parents whose children are still in school? I belong to an NGO with a soft spot for widows. We have handled countless cases of widows who come for assistance to pay their children’ school fees.

One advice we give to them is that since their husbands are late, they should withdraw the children from private schools to government schools, which are affordable. Some break down in tears at the suggestion; others refuse to commit what they consider to be class suicide. In one particular case, she did tell the daughter, but she refused and stayed at home for a whole year, rather than go to a public school. That was what prompted the widow to come back for help. But all these would have been avoided if their husbands had subscribed to an education insurance plan for the children.

Death is real and inevitable. We must all accept that painful reality. Even more frustrating and distressing is the fact that nobody knows when death will come; even those who are terminally ill only know it is near. They do not know when death will strike. It is totally outside our control, but we have some control over the after effect of our death. That is what the various life insurance products are all about.

Traditionally, life insurance is a contract between an insurance policy holder, otherwise called assured or insured, and an insurance company or assurance company, called insurer or assurer, where the assurer promises to pay a specified beneficiary a sum of money in exchange for a premium, upon the death of an assured person. The term “assurer” is more often used for life insurance companies, while insurer is used for non-life insurance company, but they are often used interchangeably. Depending on the contract, the policy can be extended to cover other events such as terminal illness or critical illness and funeral expenses. The policy holder typically pays a premium, either regularly or as one lump sum.

The insurance market has grown and assurance companies now offer a wide range of life assurance products to deal with virtually all circumstances of human existence as long as life and death are involved. Life assurance is broadly divided into term assurance and endowment life policies. Today we are going to deal with only term assurance products.

Term assurance is life insurance that provides coverage for a specified period, mostly one year. Thereafter, the assured may renew the policy on existing terms or renegotiated terms. Unlike endowment policies, term assurance policies do not accumulate cash value. If the assured dies during the term, the death benefit will be paid to the beneficiary. But if nothing happens, there is no payment when the policy lapses. Term insurance is comparatively cheaper; it is also a smart way to make financial provisions for loved ones in the event of death, especially those with young families. As the assured grows older, his premium increases. This is based on the assumption that older people are more likely to die than young people, all things being equal. But we know they are never equal.

Let us look at some term assurance products that are available in the Nigerian insurance market. There is the welfare plan for students. Here the school subscribes to the plan and the parents pay premiums, which can be as low as N10,000 per annum, depending on the school fees and other bills and the number of students in the school. In exchange, if a parent, guardian or sponsor of a student’s dies, the scheme takes over the student’s fees and other specified expenses until the student graduates as long as the school renews the policy annually. If the schools of the children of the widows I mentioned earlier had this policy, the widows would not have had cause to come to our NGO for assistance. If the school your children attend does not have this policy, you can make your individual arrangement, although the premium might be slightly higher because insurance works on numbers: the more policy holders you have in a scheme, the lower the premium.

One very common term policy is group life insurance policy. Group life insurance is an annual life insurance cover for a group of people, usually with a common denominator: family members, employees of a company, members of a club or association, traders in a location, etc. Group life insurance gained traction with the coming into force of the new Pension Reform Act 2004, as amended in 2014, which made group life insurance compulsory for all establishments and companies in Nigeria with three or more employees. Group life insurance typically provides for a payment of the sum assured in the event of an employee’s or a member’s natural or unexpected death. It does not cover death via suicide.

Many life assurance companies also have various group welfare plans for groups like traders in a particular location or line of business, mechanics, vulcanizers, drivers, etc. the premiums are usually low, an average of N8,000 per annum for death benefit of N1m to the family of the deceased. The welfare schemes are sometimes a blend of group life insurance and group accident insurance. There is provision for permanent disablement, temporary total disablement and even funeral expenses. That way the assured can also benefit from the policy and not only family after his demise.

All these policies have one thing in common: they provide immediate and bulk financial relief to the assureds or beneficiaries in the event of an occurrence insured against. For people without reasonable savings – and they are in the majority – this bulk money is a game changer. Talk to a Registered Insurance Broker (RIB) today.