Foundational Questions - Insurance 101 for Nigerians

Foundational Questions - Insurance 101 for Nigerians

This section is designed to provide the fundamental "why" behind insurance, addressing the most basic user questions and challenging common misconceptions. It must frame insurance not as a luxury or an unnecessary expense, but as a critical financial tool for everyone.

Question: What is insurance, and why do I need it?

Answer: At its core, insurance is a simple, smart agreement. You pay a small, regular fee (a premium) to a licensed insurance company like AIICO, and in return, we promise to protect you from major, unexpected financial losses. This financial shield is what you rely on when things go wrong—like a car accident, a sudden illness, or a fire at home. Without it, a single event could wipe out your savings or plunge you into debt. It's a way to pool risk with many others so that when you need help, the support is there.  

I'm a careful person; isn't buying insurance a waste of my money?

Answer: This is one of the biggest myths about insurance. Many people think premiums are money down the drain if they never make a claim, but this thinking can be financially devastating. A single, unforeseen event can be incredibly expensive. For instance, an unexpected emergency surgery could cost much more than years of health insurance premiums. Similarly, a single car accident causing injury could lead to medical bills that cost millions of Naira. Insurance is your financial safety net, and its true value becomes clear only when you need it most. It protects your hard-earned money from being lost to a single, unpredictable event.  

Is insurance too complicated and expensive for the average Nigerian?

Answer: Not at all. This is another common misconception. AIICO offers a wide range of products tailored for Nigerian customers, with options that are both affordable and accessible. We believe that insurance is for everyone who wants good financial protection. Many of our plans have flexible payment options, and some are even tax-exempt. Our mission is to make insurance easy to understand, and we have dedicated teams to help you find a plan that fits your budget and specific needs.  

How do insurance companies make money?

Answer: Insurance companies make money through two primary methods: by investing the premiums they collect and through underwriting profits. Underwriting is the process of assessing risk and setting premiums. The goal is to collect enough premiums to cover all claims and administrative costs. The remaining money, which is held in reserves, is invested in a wide range of assets, and the returns from these investments contribute to the company's profit and financial stability. This robust process ensures AIICO has the funds available to pay claims promptly when you need them.  

What is the National Insurance Commission (NAICOM), and why is it important?

Answer: The National Insurance Commission (NAICOM) is the primary regulatory body for Nigeria’s insurance industry. Its core responsibility is to supervise and regulate insurance companies to ensure they comply with insurance laws and, most importantly, protect policyholders' interests. NAICOM is a crucial part of the ecosystem that ensures you are doing business with a legitimate and financially stable company. A helpful tip is to use the “Verify an Operator” tool on the NAICOM website to confirm that your insurance provider is licensed and regulated.  

Are all insurance policies the same?

Answer: No, this is a dangerous misconception that can lead to being underinsured. While some policies may seem similar on the surface, they differ significantly in their coverage, exclusions, and limits. For example, in auto insurance, a basic Third-Party plan offers minimal legal coverage, while a Comprehensive plan provides a much broader financial shield. A key is to look beyond just the price and understand exactly what is and isn't covered in your policy. At AIICO, we offer products tailored to Nigerian customers with great coverage.  

What is a premium, and how is it determined?

Answer: A premium is the regular payment you make to keep your insurance coverage active. It’s essentially your subscription fee for financial protection. Your premium is calculated based on various factors that determine your risk profile. For example, with auto insurance, it depends on the type of car, your driving history, and the level of coverage you choose. For life insurance, it considers your age, health, and lifestyle. AIICO's underwriters carefully assess these factors to determine a fair and accurate premium for your policy.  

Can I change my insurance policy after I've bought it?

Answer: Depending on the type of policy, you may have the option to make changes. For many life and general insurance plans, you can adjust coverage amounts, update personal information, or change beneficiaries by contacting us. It’s also important to regularly review your policy to ensure your coverage is still adequate as your circumstances change and your assets grow.

What is a "Deductible" and how does it work?

Answer:The deductible is the out-of-pocket amount you must pay toward a claim before the insurer covers the rest. For instance, if you have an accident with  

N50,000 in damages and your deductible is N20,000, you pay the N20,000, and AIICO pays the remaining N30,000. A higher deductible usually means a lower premium, but it's important to choose an amount you can comfortably afford if you need to make a claim.  

What is a "Rider"?

Answer: A rider is an amendment or an add-on that modifies the terms or coverage of your original policy. Riders are a great way to customize your plan to fit your specific needs, often for an additional cost. For example, a life insurance policy might have an "Accidental Death Rider" that pays an additional sum if you die in an accident, or a health plan might have a rider for maternity coverage. Riders allow you to get the extra protection you need without buying a whole new policy

Question: What exactly is Third-Party Motor Insurance and Is Third-Party Insurance compulsory in Nigeria?

Answer: In Nigeria, a law mandates that every vehicle must have a minimum level of insurance coverage, which plays a crucial role in ensuring the safety and financial security of drivers on the road. This regulation is vital as it provides a safety net for unexpected incidents that may occur while driving.

Consider a scenario where you accidentally injure someone in an accident or damage another driver's car, or even cause harm to someone’s property. In such cases, your insurance provider—in this case AIICO steps in to provide assistance. They handle the financial implications of the situation by covering the costs associated with medical bills for the injured party, as well as expenses related to car repairs or property damage.

Having this level of coverage not only protects you from substantial out-of-pocket expenditures but also grants you peace of mind. You can drive with confidence, knowing that you are prepared to face unforeseen circumstances without the overwhelming fear of bearing those hefty expenses alone. This insurance requirement ultimately promotes responsible driving and contributes to a safer environment for all road users.

What risks does it not cover?

Answer: This policy is all about protecting others when you're on the road. It doesn't cover things like fixing your own vehicle, dealing with the theft of your car, or any injuries you might face as the driver. Instead, its main focus is to make sure that if something goes wrong while you're driving, the people affected are taken care of.

How much does third-party auto insurance cost?

Answer: A flat rate of N15,000

Is the premium the same for all types of vehicles??

Answer: The premium is the same for both sedan/saloon vehicles and SUVs. However, other types of vehicles, such as buses, motorcycles, tricycles, vans, tractors, and more, have different premiums as stipulated by NAICOM.

Can I upgrade later to a bigger plan?

Answer: Absolutely! You can switch to Enhanced Third-Party or Comprehensive coverage whenever you need to. We'll adjust your premium accordingly, so you always have the right level of protection to suit your situation. We're here to make sure you’re covered whenever it matters most!  

How do I make a Third-Party claim?

Answer: If you find yourself in an accident, it’s important to take the right steps to ensure everything is handled properly. First, make sure to report the incident as soon as possible. This can involve notifying your insurance company and, if necessary, local authorities.

Next, be prepared to fill out a claim form. This document will require essential details about the accident, including the date, time, and location, as well as a description of what happened. Ensure you include any relevant information about the parties involved.

Taking photos of the accident scene can be incredibly helpful. Capture images of the vehicles, any damages, and the surrounding area. If the police are called to the scene, obtaining a police report can provide official documentation of the incident, which is often crucial for processing your claim.

Additionally, you’ll need to share information about the other party involved in the accident. This includes their contact information and insurance details, if applicable.

Once you’ve gathered all this information and submitted your claim, AIICO will begin processing it according to your policy. They will evaluate the details provided and work towards settling the matter fairly and appropriately.

Remember, taking these steps can make a significant difference in how efficiently your claim is handled and resolved. 

Will Third-Party cover me if I borrow a friend’s car?

Answer: No,the policy is tied to the insured vehicle, not just the driver.

How can I verify that my auto insurance policy is genuine?

Answer: You can verify your car insurance certificate in Nigeria by dialing the USSD code \*565\*11# or by visiting the askniid.org website. For the USSD method, dial the code, then input your vehicle's registration number when prompted. To use the website, go to askniid.org, select the "Check Policy" option, then choose "Vehicle Policy" and enter either your plate number or insurance policy number to check its authenticity.

Why should I still consider Third-Party if it doesn’t protect my car?

Answer: Because it’s mandatory, affordable, and shields you from potentially huge liabilities to other people.

If there’s an accident but I’m not at fault will my insurance still cover the third party?

Yes, we will pay claims if there was a collision with your vehicle 

Can I still buy this plan if my car is used for business purposes and is the premium the same as personal-use cars?

Answer: Yes, you can, but we recommend opting for comprehensive insurance as it provides complete protection for your vehicle and covers third-party damages. PLEASE NOTE that the premium for commercial vehicles is different.

Question: What makes Enhanced Third-Party different?

Answer: This insurance plan is designed to give you more than just basic coverage. It goes the extra mile by offering a safety net for your own car as well. If you find yourself in an accident, there's a limited amount set aside specifically to help cover the repairs for your vehicle. This added layer of protection can really ease your worries, knowing that you won't be left to handle everything on your own. It’s all about giving you the peace of mind that, no matter what happens, you’ll have some financial support to get your car back on the road.

What risks does it not cover?

Answer: This policy is all about protecting others when you're on the road. It doesn't cover things like fixing your own vehicle, dealing with the theft of your car, or any injuries you might face as the driver. Instead, its main focus is to make sure that if something goes wrong while you're driving, the people affected are taken care of.

How much does third-party auto insurance cost?

Answer: A flat rate of N15,000

Is the premium the same for all types of vehicles??

Answer: The premium is the same for both sedan/saloon vehicles and SUVs. However, other types of vehicles, such as buses, motorcycles, tricycles, vans, tractors, and more, have different premiums as stipulated by NAICOM.

Can I upgrade later to a bigger plan?

Answer: Absolutely! You can switch to Enhanced Third-Party or Comprehensive coverage whenever you need to. We'll adjust your premium accordingly, so you always have the right level of protection to suit your situation. We're here to make sure you’re covered whenever it matters most!  

How do I make a Third-Party claim?

Answer: If you find yourself in an accident, it’s important to take the right steps to ensure everything is handled properly. First, make sure to report the incident as soon as possible. This can involve notifying your insurance company and, if necessary, local authorities.

Next, be prepared to fill out a claim form. This document will require essential details about the accident, including the date, time, and location, as well as a description of what happened. Ensure you include any relevant information about the parties involved.

Taking photos of the accident scene can be incredibly helpful. Capture images of the vehicles, any damages, and the surrounding area. If the police are called to the scene, obtaining a police report can provide official documentation of the incident, which is often crucial for processing your claim.

Additionally, you’ll need to share information about the other party involved in the accident. This includes their contact information and insurance details, if applicable.

Once you’ve gathered all this information and submitted your claim, AIICO will begin processing it according to your policy. They will evaluate the details provided and work towards settling the matter fairly and appropriately.

Remember, taking these steps can make a significant difference in how efficiently your claim is handled and resolved. 

Will Third-Party cover me if I borrow a friend’s car?

Answer: No,the policy is tied to the insured vehicle, not just the driver.

How can I verify that my auto insurance policy is genuine?

Answer: You can verify your car insurance certificate in Nigeria by dialing the USSD code \*565\*11# or by visiting the askniid.org website. For the USSD method, dial the code, then input your vehicle's registration number when prompted. To use the website, go to askniid.org, select the "Check Policy" option, then choose "Vehicle Policy" and enter either your plate number or insurance policy number to check its authenticity.

Why should I still consider Third-Party if it doesn’t protect my car?

Answer: Because it’s mandatory, affordable, and shields you from potentially huge liabilities to other people.

If there’s an accident but I’m not at fault will my insurance still cover the third party?

Yes, we will pay claims if there was a collision with your vehicle 

Can I still buy this plan if my car is used for business purposes and is the premium the same as personal-use cars?

Answer: Yes, you can, but we recommend opting for comprehensive insurance as it provides complete protection for your vehicle and covers third-party damages. PLEASE NOTE that the premium for commercial vehicles is different.

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