NIGERIAN HOME INSURANCE EXPLAINED By Lape Soetan www.ip4properties.com
Nigerians generally are superstitious people. Acquiring home insurance seems to imply that the home will burn down, be burgled or otherwise be damaged in some way. Of course, this is hardly the case. In the same way that carrying an umbrella when one goes out does not mean one is ‘asking ‘ for a rainy day, obtaining an insurance policy is not ‘asking’ for disaster. Insurance of any kind, but home insurance in particular is simply a precautionary measure, much like the vaccinating a baby.
Home insurance may be described as a guarantee of compensation for loss, damage or any other negative incident to the home provided by a company or organisation. The type of home insurance to buy depends on whom the property belongs to.
In Nigeria, the person who legally owns a home may acquire a Home Owner Comprehensive policy which insures the dwelling as well as the possessions or personal property within the house against fire, burglary and even natural disasters such as floods and earthquakes. In addition, such a person could get a Public Liability policy. A Public Liability policy covers accidents that happen to other people on your property for which you may be held responsible, such as a neighbour tripping on broken steps on your property.
A tenant on the other hand is usually advised to buy a House Holder Comprehensive policy. This insures the possessions or personal property within the house against fire, burglary and natural disasters. The main difference between House Owner and House Holder policies is that with the House Holder policy, only the possessions are insured as opposed to the House Owner policy where the dwelling as well as its possessions are insured.
Insurance companies sometimes talk in terms of actual value and replacement value. A home insurance policy coverage for the replacement value of a home means that if a claim is made, the client will be paid back the amount for which he initially insured the property. For example, if a house was insured for N2million in 1990 and a claim is made in 2005, the insurance company pays N2milion inspite of the fact that the house may now be worth a lot more than that. On the other hand, getting home insurance coverage for the actual value of the property means that if a claim is made, the current value of that property, and not the value it was when it was insured, will be paid. The most obvious drawback to using a home insurance policy for the actual value is that they usually entail paying higher premiums.
Choosing the right insurance company
One of the best ways to choose the right insurance company is to ask friends and relatives for recommendations. Another is to consult an Insurance Broker. An insurance broker’s job is to determine the best insurance company with which to place a client’s premium such that the client’s interest is protected. Unlike an insurance agent who works for a specific company, an insurance broker is not restricted to working with any insurance company in particular. However, it is important to note that a broker is a professional and charges a certain fee for consultation. In addition, insurance companies in Nigeria are required to be registered with the National Insurance Commission (NAICOM) so looking out for insurance companies that are licensed by NAICOM to operate is a good idea. It is important to find out as much as possible about an insurance company or underwriter before settling on one. For example, in Nigeria, insurance companies licensed to practise as life insurance companies are required to have a capital base of at least N150m, non-life insurance companies, N250m and composite insurance companies (those licensed as both life and non-life insurance companies) are required to have a capital base of at least N350m. However, the Federal Government of Nigeria may soon enforce a law making it compulsory for all insurance companies to have a capital base of at least N2bn.
Before choosing an insurance company ask questions such as:
• How much expertise does the insurance company have?
• Who are the company’s key officers?
• How quickly are your enquiries attended to?
• How much capital base does the company have?
• What is the insurance company’s claims payment record?
What happens after choosing an insurance company?
The procedure for buying insurance having chosen one, varies between organisations but generally, after preliminary discussions to determine the exact requirements of the client, the insurance company gives the client a proposal form and asks that he prepare a document indicating the type of property to be insured and also list the possessions within the house as well as their values. The property and possessions are viewed by a representative of the insurance company and a premium is determined. The premium is the amount that the client pays for the insurance policy he has chosen.
As a general rule, insurance policies are written as 1-year long contract. This means that the contract has to be renewed each year (if the client wishes to continue with the policy or indeed, the company). Usually, the premium increases each year as the policy holder accumulates more personal property or the possessions increase in value or the house itself increases in value.
The most significant factor in determining the premium which a client would pay is the location of the property. For example, in Lagos, a 3-bedroom house in Meiran would not attract as high a premium as the similar house in Ikoyi.
Home insurance is probably one of the most sensible things to do once you have a home. However, it is important to read insurance policies carefully or better still, have your lawyer read them before signing any document. Nobody hopes to have cause to need insurance but wouldn’t you sleep better at night knowing your home was protected?