Common Mistakes Nigerians Make with Insurance

What Does It Mean to Make a “Mistake” with Insurance

“Mistakes” in insurance are wrong actions or misunderstandings that cause you to:

• Pay more than you should

• Get less coverage than you need

• Delay claim payments

• Have claim denied or partly rejected

• Be involved with fraud or fake policies

Mistakes can happen when buying insurance, during claim filing, or policy renewal. Knowing mistakes helps you protect yourself — your money, your rights, your well‑being.

Why Nigerians Sometimes Go Wrong with Insurance

Before listing mistakes, it’s good to know why mistakes happen. Understanding causes helps avoid them.

• Low Awareness or Education: Many people do not fully understand what insurance terms like “deductible”, “exclusions”, “sum insured” mean.

• Trust Issues / Skepticism: Because some insurers have failed to pay claims quickly, or some fake operators exist, people do not always trust insurance.

• Cost Pressure: Trying to reduce cost leads some to cut corners (lower coverage, cheap agents, skipping required documentation).

• Time Constraints: People rush through policy purchase and sign without reading fine prints.

• Misleading Information: Some brokers or agents give wrong or incomplete information; some fake firms promise benefits they can’t deliver.

• Regulatory Gaps & Fake Operators: Fake insurance policies or unlicensed firms lure people. NAICOM often warns about unlicensed operators.

• Poor Service Delivery: Delays, lost paperwork, lack of customer support make people frustrated. Sometimes policyholders don’t follow up or know their rights.

Common Mistake: Buying Insurance from Unlicensed or Fake Operators

What This Mistake Looks Like

• Purchasing a policy from a person or cooperative that is not a licensed insurance company.

• Buying “motor third‑party insurance” or other policy from unverified source (fake brokers or societies claiming legitimacy).

• Not checking the insurance company’s registration with NAICOM (National Insurance Commission).

Why It Happens

• Unlicensed operators may offer cheaper premiums or quick promises.

• Some people do not verify whether the insurer is licensed.

• Lack of awareness that NAICOM maintains list of licensed insurers.

Consequences / Risks

• Policy may be invalid. If you have accident, damage, or theft, insurer may refuse to pay.

• Money lost, no protection.

• Legal issues: motor law requires compulsory third‑party insurance etc.; fake policies won’t help you if police or courts ask for proof.

• Danger: no regulatory oversight or guarantee.

How to Avoid This Mistake

• Always verify insurer is licensed: check NAICOM official website.

• Ask for license number, proof, company address & contact details.

• Don’t accept policies from people who avoid giving full documentation.

• Beware of extremely low premium offers that seem “too good to be true”.

Common Mistake: Not Reading Policy Terms, Exclusions, and Fine Print

What Shows Up When People Don’t Read

• Discovering later that some damages are excluded (e.g. flood, riot, acts of God) and policy doesn’t cover them.

• Not knowing that certain riders are optional, not automatic.

• Misunderstanding what “sum insured” is vs what actual repair costs or replacement cost will be.

• Thinking “full coverage” means everything—sometimes limit is low or some items excluded.

Why People Skip the Fine Print

• Policy contract is often long, with complex words.

• Agents may gloss over technical details.

• People want to buy fast, maybe due to urgency (car purchase, house, etc.).

• Lack of literacy or language difficulties.

Consequences / Risks

• Claim rejections because event is excluded.

• Underpayment: insurer may pay less than you expect because of deductible or depreciation, or because item not covered.

• Paying extra later to add riders that you should have taken initially.

• Frustration, loss of trust, wasted time.

How to Do Better

• Read policy document carefully. If terms are unclear, ask agent or insurer to explain in simple language.

• Look specifically for sections labeled Exclusions, Conditions, Deductibles, Limitations.

• Ask for example: “If flood damages my house roof, will this be covered?”

• Compare similar policies: see which has more favorable terms.

Common Mistake: Underinsuring or Picking Too Small Coverage Limits

What Underinsurance Means

• Choosing a sum insured that is far less than what you actually own or what damage or loss would cost.

• Buying minimal coverage to save premium, but that means you may pay huge out‑of‑pocket when something happens.

Why It Happens

• To reduce premium cost, people pick low coverage.

• Not estimating value of assets correctly (home contents, vehicle value, medical costs).

• Choosing “just enough” to meet requirements (like just motor third party) but not enough protection.

Consequences / Risks

• In case of major losses, you have to pay difference.

• Some claims may be partly paid; insurer only pays up to coverage limit, you cover the rest.

• Loss of value: if coverage is too low, you cannot replace damaged or destroyed items properly.

How to Avoid Underinsurance

• Make an inventory: list contents, their value; estimate replacement cost of property or vehicle.

• Choose reasonable sum insured, possibly a bit more to allow for inflation.

• Add buffer for unforeseen costs.

• Review policy periodically; adjust sum insured when you buy new things, renovate, or value increases.

Common Mistake: Choosing Too High Deductibles / Skipping Riders You Need

What This Mistake Looks Like

• Deductible or “excess” is the amount you pay before insurer pays. If it’s very high, you may struggle to pay that when claim arises.

• Skipping optional riders (for flood, earthquake, theft, etc.) to reduce cost, then being caught when those events happen.

Reasons for Doing This

• To make premium affordable.

• Agent or broker may under‑recommend riders to make sale easier.

• Lack of belief that certain risk (e.g. flood) will occur.

Risks and Consequences

• When claim happens, high deductible means you bear big cost before insurer’s help.

• If a risk is excluded (because rider skipped), damage from that risk won’t be covered at all.

• May cost more in the long run.

How to Decide Deductible & Which Riders to Take

• Look at your ability to pay deductible. If you choose a high deductible, ensure you have cash savings for it.

• Check location: if you live in flood‑prone area, a flood rider is important; if frequent storms, windstorm or hail riders matter.

• Ask insurer what riders are available and their costs.

• Balance premium cost vs risk exposure.

Common Mistake: Delaying Premium Payments or Letting Policy Lapse

What Happens When You Delay or Let Insurance Lapse

• The policy may not be active when loss happens.

• Insurer might reject claim entirely.

• You lose coverage benefits.

• Renewing later might cost more or require new underwriting or waiting periods.

Why It Happens

• Forgetfulness or lack of reminders.

• Financial pressure: people delay or default because they lack funds.

• Misunderstanding renewal dates.

• Poor service by insurer or agent not issuing renewal notices.

Consequences

• Loss of protection when most needed.

• Large expenses when disaster strikes.

• Repairing or replacing items out of pocket.

• Difficulty getting insurer to reinstate policy, sometimes with worse terms.

How to Prevent Lapses

• Set reminders (phone, calendar).

• Pay premiums on time or early: some insurers allow monthly, quarterly payments.

• Keep good record of due dates and receipts.

• If money tight, plan ahead, budget for insurance.

• Consider automatic debit if insurer allows.

Common Mistake: Not Documenting Claims Properly (Poor Proofs)

What Documentation Mistakes Look Like

• Taking unclear photos or no photos of damage.

• No receipts, no proof you owned items.

• Missing official reports: police for theft, hospital for injury, fire service for fire, etc.

• Poor estimates or repair bills without proper details.

Why People Fail in Proofs

• Panic at moment of loss; neglect to document.

• Losing receipts, forgetting to keep them.

• Maybe unaware that proof is necessary.

• Relying on verbal claims or memory only.

Risks of Poor Documentation

• Insurer may ask for proof and if it’s weak or missing, reduce claim or deny.

• Delay in settlement due to requests for more documents.

• Disputes over how much damage really happened.

How to Document Well

• Immediately take photos/videos from different angles, ideally date/time stamped.

• Keep receipts, invoices, ownership proofs.

• Get official reports if required.

• Write down what happened: date, time, place, names of witnesses.

• Keep duplicates or digital copies.

Common Mistake: Late Notification of Loss or Accident to Insurer

What Late Notification Means

• Waiting days or weeks to inform your insurance company after the incident.

• Not following policy’s required notice period.

Why It Happens

• People hope damage will go away or repair cheap so they don’t involve insurer.

• Unaware of time limits in policy.

• Lack of urgency or communication.

Consequences

• Insurer may reject claim citing “delay in notification”.

• Evidence may degrade or vanish (photos, witnesses, scene), making verification hard.

• Increased risk of fraud suspicion.

How to Avoid Late Notification

• As soon as incident happens, contact insurer (phone, email, app).

• Check policy for “notification period” and obey it.

• Do not wait for all details; even initial report helps; then follow up with full claim.

Common Mistake #8: Using Wrong Agents/Brokers or Not Checking Credentials

Mistakes with Agents & Brokers

• Dealing with unlicensed or fake agents.

• Agents who give wrong advice or hide parts of policy that are unfavorable.

• Not comparing multiple agents/brokers.

• Blindly trusting agent without verifying their license and company credentials.

Why It Happens

• Agents may promise cheaper rates or easier claim settlement to win clients.

• Customers may not ask agent credentials or proof of license.

• Lack of public awareness which agent/broker is legit.

Risks

• Policy may be invalid if sold by unlicensed agent.

• Wrong or misleading information could lead you to buy inadequate coverage.

• Claims may be denied because agent failed to disclose required information or misled you.

How to Choose Good Agent/Broker

• Ask for licence number, proof that broker/agent is registered with NAICOM.

• Verify with insurer company which they represent.

• Read reviews or ask others who used them.

• Do not give large payments to agents you don’t trust.

• Use agents who explain policy clearly, not just sell.

Common Mistake #9: Assuming Claims Will Always Be Paid Quickly

What People Expect vs Reality

• Many believe once claim is filed, insurer will pay fast.

• But claims involve investigation, documentation, sometimes inspections — these take time.

 Why Payments Are Delayed

• Missing or incomplete documents.

• Dispute over extent of damage or value of loss.

• Surveyor or adjuster visits delayed.

• Internal processing delays, backlog of claims.

• Possibly dispute over fault (in auto claims) or cause (in property) or whether event is covered.

Consequences of Wrong Assumption

• Frustration, financial stress.

• Paying for temporary repairs or replacements yourself.

• Losing faith in insurance.

How to Manage Expectations and Speed Up Process

• Ask insurer/agent: “What is expected timeline for this type of claim in my area?”

• Provide full documents from start.

• Follow up politely but regularly.

• Use an agent or broker who helps in communication.

Common Mistake #10: Misunderstanding Regulatory Rights and NAICOM Oversight

What Regulatory Rights Most People Don’t Know

• Many policyholders do not know that NAICOM regulates insurers, ensures companies are licensed, ensures companies pay valid claims.

• Many don’t know they can lodge complaints with NAICOM if insurer is unfair.

• Many don’t check that insurer is compliant with relevant guidelines or whether insurer’s company info is correct (address, phone etc.).

Why Misunderstanding Happens

• Lack of public education by insurers or regulators.

• Poor dissemination of information.

• Some people are afraid to complain or think nothing will change.

Risks

• Being cheated by insurers using fake contacts or promises.

• No recourse when claims are withheld unfairly.

• Little transparency; some companies may avoid settlement knowing policyholders may not complain.

• How to Use Regulatory Rights

• Know NAICOM’s mandate: license verification, complaints, claims oversight.

• Always check insurer’s status with NAICOM website.

• If claim is unfairly denied/delayed, file a complaint with NAICOM citing your policy number and evidence.

• Use consumer protection forums or legal routes if necessary.

Comparison: How These Mistakes Differ Among Health, Motor, Life, Property Insurance

Here is a comparison table showing which mistakes are more common in each insurance type, so you can focus on what matters most for your situation.

Real‑Life Examples of Insurance Mistakes Nigerians Made

Here are some stories (based on real patterns) that show how these mistakes hurt people. Names changed.

Example A: Fake Motor Insurance, Mr. Okonkwo’s Loss

Mr. Okonkwo bought what he thought was legal third‑party motor insurance from NCIS (a cooperative society) because it was much cheaper. He had no idea NCIS was not a licensed insurer. Later, an accident damaged another car badly; the victim sued him. Because his insurance provider was fake, policy was invalid, insurer refused payment, and he had to pay everything out of own money. He also faced legal penalties because third‑party insurance is compulsory.

Relates to NAICOM warning about fake operators.

Example B: Skipping Exclusions, Mrs. Aisha’s Flood Damage

Mrs. Aisha insured her house with standard home insurance but did not take flood insurance rider. Heavy flooding destroyed ground floor furniture. Insurer rejected the portion of damage due to flood because flood was excluded in her base policy. Mrs. Aisha had to pay for those parts of damage.

 Example C: Underinsured, Mr. Emeka’s Car Accident

Mr. Emeka insured his car for N1,500,000 though it was worth about N4,000,000. After a serious accident, repair cost was near N3,000,000. Insurer paid up to his insured sum less deductible, leaving him to pay the rest out of pocket.

Example D: Late Notification, Mrs. Kemi’s Health Claim

Mrs. Kemi had health insurance and underwent surgery. She delayed sending claim papers for 30 days thinking she could handle small bills first. Insurer rejected the claim citing policy requiring notification within 14 days.

Example E: Wrong Broker, Mr. Suleiman’s Misled Contract

Mr. Suleiman bought life insurance and was told by a local agent that critical illness cover was included. Later, when he got ill, he found that this cover was not included. The policy documents didn’t list those benefits. The agent had misled him.

Summary Table Before Conclusion

Conclusion

Insurance is a very useful tool. It helps protect us from big losses and unexpected costs. But insurance only works if you use it smartly. Many Nigerians make simple mistakes — acting too fast, trusting wrong people, not reading policy documents, being unprepared with documentation, delaying things. These mistakes can cost you more than the premium itself.

To avoid mistakes:

• Always verify that insurer and agent are legal and licensed.

• Read the policy carefully. Know what is covered, what is excluded.

• Choose correct coverage limits, riders, deductibles.

• Pay premiums on time.

• Document everything.

• Notify insurer quickly when loss happens.

• Use trustworthy agents or brokers.

• Know your regulatory rights: NAICOM is there.

By doing this, you will get the protection insurance promises. You’ll avoid disappointment, delays, waste, and ensure you benefit properly when things go wrong.