Insurance is a hedge against risk and uncertainty that could lead to losses or financial consequences. Once a risk is identified, it’s assessed and then the Insurer will determine if it can be underwritten.

Almost all type of risks can be insured and in the developed countries all types of Insurance Contracts exists, like Celebrities insuring their body parts or voices against loss of income. They do this because these are assets that are instrumental to their earnings. Examples include Dolly Parton insuring her bosom for US$600K, Rihanna insuring her legs for US$ 1 Million, Bruce Springsteen insuring his vocal cords for US$ 6 Million, and several others.

In Nigeria there are two classes of Insurance, compulsory insurance and non- compulsory insurance. The compulsory insurance are classes of insurance backed up by various Nigerian Statutes and which can be fully enforced and defaulters penalized. These include;

Statutory Group Life Insurance - section 9(3) of Pension Reform Act, 2004
Employee’s Compensation Insurance- section 33 of Employee’s Compensation Act, 2010
Occupier’s Liability Insurance - section 65 of Insurance Act, 2003
Motor Third- Party Insurance – section 68 of Insurance Act, 2003
Builder’s Liability Insurance – section 64 of Insurance Act, 2003
Health Care Professional Indemnity Insurance- section 45 of National Health Insurance Act, 1999

Generally, lots of Insurance products are offered in Nigeria and these include including Motor Vehicle, Property, Fire and Theft, Marine, Children Education fund, funeral, Life, Travel Insurance and several other types.

Despite this, Insurance penetration in Nigeria is very low even though there exists several well capitalized and professionally managed Insurance companies paying claims promptly. Insurance premiums in Nigeria accounts for only 2% of GDP while in South Africa it accounts for about 14%.

We simply don’t buy insurance because we don’t believe any benefit exists but these are some of the advantages or reasons to buy insurance contracts.

Security and Safety: Insurance ensures that a business or Individual isn’t wiped out in the event of unfortunate circumstances. A business man can focus knowing that he will be compensated if a loss arises from an insured risk.

Savings and Investment: Life Insurance helps one save and the insured can draw on this investment when the need arises.

Provides Tax Benefits: Insurance allows tax benefits for amount of premium being paid.

Insurance Stimulates the Economy: Insurance companies generate Billions yearly in premium income and these are used to settle several claims which have a trickledown effect on the economy. Insurance companies are also major players in the Stock, Bonds and Property markets and infrastructure financing which helps the economy.

Distributes Risk: Insurance ensures that risk is spread over several people rather than on an individual.

Increase ability to obtain loans: Without Insurance it will be very difficult to obtain car loans or housing loans as Insurance provides the lender some comfort or sense of security.

Income security: Insurance Pension plans provide regular income during retirement.

Protection against financial loss: Credit insurance allows a company to be indemnified in the event that a debtor defaults on his debt. This protects the firm against financial loss.