What Is Insurance? Simple Guide for Nigerians

What is Insurance?

Insurance is a way to protect yourself, your money, and your things from unexpected problems.

When you buy insurance, you are making a deal with an insurance company. You agree to pay a small amount of money regularly (called a premium), and the company agrees to help you pay if something bad happens—like an accident, illness, fire, or theft.

Simple Example

Imagine you have a car. You pay an insurance company every month. One day, someone crashes into your car. Instead of using all your savings to fix it, your insurance helps you pay the repair cost. That’s insurance in action.

Why Insurance Matters for Nigerians

Many Nigerians face risks every day—from road accidents to hospital bills, fire outbreaks, theft, and business losses. Unfortunately, most people do not have any safety net. When something bad happens, they pay from their pocket or borrow money.

Here’s why insurance is important in Nigeria:

• Health care is expensive
  With insurance, you can go to the hospital and get treated without paying huge bills.

• Accidents are common
  Nigeria has one of the highest road accident rates. Car insurance protects you from massive loss.

• Job security is low
  Life insurance and income protection plans help you stay prepared even if you lose your job or die early.

• Fires, floods, and theft are real
  Home and business insurance protects your property from destruction or robbery.

• Education costs are high
  Education insurance helps you plan your children’s future, even if you’re not around.

With insurance, you don’t panic when life hits you hard. You bounce back faster.

How Does Insurance Work?

Let’s break it down into 6 easy steps:

1. You Buy a Policy

You choose what you want to protect—your car, health, life, phone, etc.—and pay the insurance company a small amount regularly. This is called a premium.

2. You Get a Policy Document

The company gives you a paper (or email) that shows what is covered, for how long, and under what conditions.

3. Something Bad Happens

If what you insured against happens—e.g., accident, sickness, death—the insurance company steps in.

4. You File a Claim

You inform the insurance company that something has happened. This is called making a claim.

5. Company Investigates

They check if the issue is real and if it fits the terms in your policy.

6. You Get Paid (if approved)

If everything is correct, they pay for the damage, treatment, or loss as agreed.

Insurance works on trust. You trust them with your money; they trust you to tell the truth when claiming.

Main Types of Insurance in Nigeria

There are many kinds of insurance, but here are the main ones Nigerians should know:

1. Life Insurance

• Pays money to your family if you die.

• Helps with funeral costs or replaces your income.

• Great for parents, breadwinners, and workers.

2. Health Insurance

• Pays for medical care, hospital visits, tests, surgeries, drugs, etc.

• You don’t need to pay big bills at the hospital.

• NHIS (National Health Insurance Scheme) is one form in Nigeria.

3. Car / Vehicle Insurance

• Third-party insurance: Pays others if you hit their car or injure them. Required by law in Nigeria.

• Comprehensive insurance: Covers your car, the other car, and even theft or fire.

4. Home Insurance

• Covers your house and properties inside it.

• If fire, theft, or flooding happens, the insurance helps pay for repair or replacement.

5. Business Insurance

• Helps protect businesses from losses due to theft, damage, lawsuits, or staff issues.

6. Travel Insurance

• Helps if your flight is cancelled, bags lost, or you fall sick while abroad.

7. Education Insurance

• Helps parents save and plan for children’s school fees, even if something happens to them.

Benefits of Having Insurance

Why should Nigerians care about insurance? Here are the major benefits:

1. Peace of Mind

You sleep better knowing you’re protected from life’s surprises.

2. Financial Safety Net

Instead of using savings, insurance pays when things go wrong.

3. Supports Your Family

Life or health insurance ensures your loved ones don’t suffer if anything happens to you.

4. Helps in Emergencies

Insurance gives fast help when emergencies happen—like a car crash, illness, or fire.

5. Prevents Debt

You don’t have to borrow money or sell property to fix problems.

6. Encourages Saving and Planning

Some policies help you save money or invest for the future (like education insurance).

Risks of Not Having Insurance

What happens if you don’t have insurance?

• You pay everything yourself during emergencies.

• You may lose everything—car, home, business—after an accident, fire, or theft.

• Family suffers if you pass away suddenly.

• No access to quality healthcare without insurance cover.

• You live in constant fear of “what if?” scenarios.

Not having insurance is like driving a car with no seatbelt. You hope nothing happens, but if it does, the pain is big.

How to Choose the Right Insurance

Choosing the best insurance depends on your needs and lifestyle. Follow these simple steps:

Step 1: Identify What You Want to Protect

Is it your life? Car? Health? Business? Child’s future?

Step 2: Set Your Budget

How much can you afford to pay monthly or yearly?

Step 3: Compare Providers

Look at different insurance companies. Compare their prices, benefits, and reviews.

Step 4: Read the Policy Details

Check what is covered, what is not covered, how to claim, and for how long the policy lasts.

Step 5: Ask Questions

Don’t sign if you don’t understand. Ask the agent or insurer to explain.

Step 6: Start Small

Start with affordable plans. You can upgrade later.

Tip: Only buy from licensed insurance companies in Nigeria.

Insurance vs. Savings – What’s the Difference?

Best advice: Use both! Save money for goals, but use insurance for protection.

Real-Life Examples of Insurance Use

Example 1: Life Insurance

A father in Lagos has a ₦5 million life insurance policy. Sadly, he dies in a car crash. The insurance pays his wife and kids ₦5 million to help them survive and continue school.

Example 2: Health Insurance

A student falls sick in school. Instead of paying ₦80,000 for hospital tests and drugs, her health insurance covers it, and she pays only ₦3,000.

Example 3: Car Insurance

A woman’s car is hit by a truck in Abuja. The damage is ₦300,000. Her comprehensive car insurance pays for repairs.

Key Insurance Terms Explained Simply

Summary Table: Key Takeaways from the Guide

Conclusion

Insurance is not just for the rich. It’s for everyone—students, workers, parents, business owners, and even farmers.

Whether you live in Abuja, Lagos, Enugu, or Kano, life can bring unexpected events. Insurance gives you protection, confidence, and peace of mind when those moments come.

As a Nigerian, don’t wait until something goes wrong. Start small. Ask questions. Choose what fits your budget and needs. Whether it’s ₦1,000 or ₦10,000 a month, insurance is cheaper than loss.

Remember: It’s better to have insurance and not need it, than to need it and not have it.