Before now it was easier to get insurance cover while premium was yet to be paid, so it was possible that the insurers wait as long as it would take the client to pay. And in the event of a loss occurring, the insurer pays claim on compassionate basis or compelled by the regulator as the case may be.
That era is over, and therefore the actual and concrete contract for insurance is full payment of premium. This means that the insured would no longer get compensation on compassionate basis, even if it was based on long standing relationship.
This is the outcome of a policy implementation by the insurance regulator, the National Insurance Commission (NAICOM) as provided in the Insurance Act 2003.
Section 50 (1) of the Act states that “the receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk, unless the premium is paid in advance.”
Val Ojuma, managing director/CEO FBN Life Assurance Limited said what this policy means is that, irrespective of whether insurance cover has been agreed between an insurance company and a 3rd party, and 3rd party has not physically paid the premium either to the insurer directly or to an insurance Broker who has arranged the cover on behalf of the 3rd party, no contract of insurance exists.
He noted that the implication of this is that the 3rd party has no insurance cover until the premium has been paid. If premiums aren’t paid on time, there will be no compensation from insurers in the event of loss. It is therefore essential that the insuring public pays premiums before they fall due, Ojuma noted.
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Someone has said… let me forget insurance first and do some other things. This position may sustain if nothing happens, but if it happens, the loss can wipe away all that you have labored for life. Cost of replacement is huge, so pay your premium to be covered.
Why you must pay your premium to get cover
Sometimes in life things go wrong. If your house burns down, an earthquake strikes, your car is involved in a crash or you fall ill, you may face large costs which you can’t afford. The risk of some of these things happening may be small. But if they did happen, the impact on your finances could be huge. You can either face these risks yourself or take out insurance to cover them.
How insurance works
Buying an insurance policy transfers the risk from you to an insurance company. You pay an amount of money called a premium to an insurance company. If an unexpected event occurs and it is covered by the wording of your policy, your insurer pays you a sum of money or repairs or replaces the items that are lost or damaged.
What insurance do you need?
You probably need some kind of insurance, but not everyone needs all the different kinds. How much insurance you need will depend on your own circumstances and attitudes. It’s easy to buy too much insurance. It’s just as easy to not buy enough. When you consider getting insurance you need to weigh up the risks of not having the insurance against the costs of buying it. Ask yourself these four questions:
• What is the risk you would be insuring against? This could be death, a fire in your home, or your car getting stolen. Or getting sick and not being able to work.
• What are the chances of it occurring? There’s probably a small risk of a fire in your home, but it will cost a lot if it happens. The chances of your car being damaged or stolen is much higher, but the costs may not be as great as losing your home.
• What would happen? If you died, would your family be able to pay for the funeral and legal expenses, and how would they manage without the income you earned. If there was a fire in your home, would be able to replace the house (if you own it) and all your possessions, or would you lose them completely?
• How much would it cost? Would you have enough money saved to cover the cost and would you want to use your savings for this? (For example, would you want to dip into your retirement savings?)
Like ‘Sorted’, an independent money guide says “If you can’t afford for something to happen, you should seriously consider taking out insurance. Insurance is important when you’d be badly affected by a loss – even one that is not very likely to happen – and it’s less important to have insurance for losses you could cope with” advise yourself.
