#Secure Your Financial Future (1): Meaning, Types and Importance of Insurance

Meaning:

Insurance is a practice where an individual or entity receives financial compensation for a specified loss, damage, illness or death from an Insurance Company after a paying a sum of money called premium. Insurance may also include investing some money for the purpose of reaping future benefits. A business that provides coverage in the form compensation resulting from loss is known as an Insurance Company.

Insurance is there to provide protection for yourself, your investment and your business. Disaster could take any form, car breaks down, roof leaks, a major home fire, an automobile accident that leads to a legal action and someone in the family becomes ill. Insurance gives you peace of mind and you know if anything happens to you, your family or your business that you will be financially secure.

In essence, Insurance helps in guiding against risk that may likely occur in the future.

Types of Insurance:

The following are the basic types of Insurance obtainable in Nigeria

1. Life Insurance: 

Life Insurance provides a monetary benefit a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral or other expenses.

2. Health Insurance: 

Health Insurance policies cover the cost of medical treatment.The National Health Insurance Scheme (NHIS) of Nigeria provides cover to Nigerians on health.

3. Motor Insurance: 

Motor Insurance provides protection to the insured against financial loss in the event of an incident involving the vehicle he owns such as as fire, collision etc.

4. Home Insurance: 

Home Insurance provides coverage for damage or destruction of a policyholders home. The policy may also include movable and non movable property in the home.

5. Marine Insurance: 

This covers the loss or damage of vessels at sea or on inland waterways, and of cargo in transit, regardless of the method of the transit.

6. Education Insurance: 

This policy provides money for a child's education even if the family breadwinner dies. It also includes an education savings plan where a breadwinner saves some money that will serve as a future investment income for the child when he comes of age.  

Importance of Insurance:

1. Insurance provides safety and security against the loss of an individual's assets.

2. Insurance reduces business risk or losses.

3. Insurance Reduces fear, tension, anxiety of future uncertainty.

4. It encourages confidence to undertake new venture.

5. It assist people to save for the future.

6. Insurance serves as a form of investment where maturity benefit plus interest is paid at the end of the policy.

7. Reduces the tendency of reckless spending.

*Michael Onjewu, Risk Analyst, Union Assurance PLC, Abuja. 07032879723, @MikoOnjewu