How to Choose the Best Life Insurance Plan in Nigeria
A popular Nigerian proverb says that when we fail to talk about death, we give the impression that death does not exist. Death is a reality of human existence and we must not fail to discuss it when necessary as an inevitability. Hence, we need to always prepare for it. The best way to do that is to buy the best life insurance plan.
We need to ensure that we make adequate plans to carter for our dependent ones when we are no longer there. It’s on this ground that I wish to direct you on the best possible way to make such plans based on insurance policies. You need to get the best life insurance plan.
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Life insurance was developed; to give assurance and protection for your family and dependents should something bad happen to you. Something bad here does not only mean when you die, it can also mean when you lose your source of income and is unable to provide for your dependent ones.
These are what the best life insurance plan covers.
If you have any dependents you love and wouldn’t want to suffer when you are no more or when something bad happens to your income source, all you need to do is to get yourself insured. Think about the countless numbers of widows and their children who are suffering and have to drop out of school because the breadwinner couldn’t be there to provide for their needs anymore.
Also read: Understanding the differences between an annuity and life insurance
Owing to the fact that there exists lots of insurance companies as well as life insurance products, deciding on the most suitable one may be such a confusing process. In this piece, I will guide you on how to make the best choice. Follow through to the end and you will get the best life insurance plan.
Difference between Group and Individual Life Insurance Policy
Individual life insurance is an insurance policy bought solely for you and paid for by you. In this kind of policy, you would be able to decide on the features you want and the extent of protection you desire. Group insurance, on the other hand, is bought by your employer or a union to which you belong as a collective policy.
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You would have no control over the policy and sometimes, the coverage might not be sufficient to provide for your dependents when you are gone but it is usually cheaper and cost-effective.
How Much Life Insurance Coverage Do You Need?
How much life insurance coverage you need depends on the aspects of your dependents’ life you would want the policy to cover. The more the coverage, the higher the cost. For instance, if you have kids, you would want to provide for things like their education and feeding, living expenses like mortgages, loan repayments, utility bills, etc.
These will determine the cost of your chosen policy. Take the steps below on how to calculate your life insurance needs and decide on getting the best life insurance plan.
- Do make a list of all the expenses your dependents would likely make when you are gone e.g. tuition fees, feeding, mortgages, etc.
- Then create another list of all debts including loans and credit card debts
- Also prepare another list to include all the assets you currently have like stocks, bonds, cash in savings, etc.
- Then do look into the existing insurance coverage that you already have. For instance, if you are employed, there are chances that your employer would already have you covered to an extent.
- Finally, add up all the anticipated expenses and debts you already calculated and deduct it from your existing policy, this would give you a clear idea of the amount of extra insurance coverage you need.
Related: How to buy life insurance policy wisely without a broker in Nigeria
For you to choose the best life insurance plan, you will have to go through the types of insurance available to you. They include:
a. Term Life Insurance
In term life insurance, you buy a policy from an insurance company to cover your life for a specific number of years- say 10 or 20 years and then if you die during that period, the benefits would be paid to your beneficiaries but if you don’t, no compensation would be paid, only your premium will be returned to you.
The premiums involved are usually low and rise over the years, sometimes to a point where it becomes unaffordable. Also, the benefits involved are not taxable, and it doesn’t build cash value or offer interests and dividends.
b. Whole life insurance
Under this type of insurance policy, you get covered for the rest of your life as subject to your ability to always pay your premiums. This policy offers a cash savings feature that allows you to borrow from the pool to cover for rainy days expenses while you are still alive but if the amount borrowed is not returned before you die, it would be deducted from the benefits that would be paid to your beneficiaries when you are dead.
c. Universal life insurance
In the universal life insurance policy, you are required to pay premiums into an investment fund account to be set up and managed by the insurance company while deducting from the fund account, the cost of your policy as well as the administrative costs of the insurance company.
d. Variable life insurance policy
The variable life policy is determined by the interest rates of the assets the insurance company invests your money in. Your benefits under this policy are pegged to the interest rates of the assets on which your policy is invested. When interest rates go up, your benefits would be high and vice-versa.
Finally, to choose the best life insurance policy for yourself, follow the instructions below
How To Choose The Best Life Insurance Plan – 7 Crucial Factors To Consider
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Patronize a reputable company with a proven track record
Insurance is a long-term business relationship, you have to choose a company that has been and survived in the business with a solid financial base and also licensed by the Government. A.M Best Co. rating services can be your best guide in identifying the companies with the best financial outlay and base.
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Work with licensed agents
This helps you get the best life insurance plan. This aspect is totally voluntary. However, if you have to work with an insurance agent, always choose that which is licensed, experienced, and with a credible reputation.
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Do not rush or be pressured into making decisions
If you going to get the best life insurance plan, you should endeavor to always take your time to strategize, plan, and choose the right life insurance policy for yourself and your dependents.
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Request for multiple quotes from your broker
Always do ask for multiple quotes from your broker or company so as to enable you an extensive background to choose from.
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Avoid the temptation of overbuying
Always do well to avoid overlaps which would only cost you more premiums. Only go for what is relevant to you and your dependents at the point in time and for the future, nothing else.
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Understand all the terms and conditions of the policy
A good understanding of the terms and conditions of the policy before purchasing will save you some costly error. Do well to always ask questions where necessary and you will definitely get the best life insurance plan.
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Review your coverage regularly
Always try to review the areas covered by your policy regularly and make necessary adjustments but do not fall into the temptation of changing your life insurance policy frequently because this would increase your premiums. In order not to end up buying a policy with unaffordable premiums, do set a budget before purchasing.
