Insurance in Nigeria can seem a bit confusing, especially when you start hearing technical terms like “premium,” “deductible,” or “underwriting.” These words can feel overwhelming if you're not familiar with the industry.
However, having a basic understanding of these terms will help you make better decisions, avoid misunderstandings, and confidently manage your insurance coverage.
This guide will walk you through essential insurance terms every Nigerian should know—explained in clear, simple language.
This is the regular payment you make—monthly, quarterly, or yearly—to keep your insurance policy valid. Think of it as the cost of staying protected.
Example: If you’re paying ₦20,000 annually for your car insurance, that amount is your premium.
The policyholder is the individual or business that owns and controls the insurance policy. If you bought the policy, you’re the policyholder.
A beneficiary is the person or group named to receive the insurance benefit if something happens to the insured, especially in life insurance.
Example: You can name your spouse or children as your life insurance beneficiaries.
Coverage describes exactly what risks your insurance protects you from. This may include accidents, illness, theft, fire, or even death.
Always read your policy document to understand what’s covered and what’s not.
When something happens that your insurance covers, you file a claim to request compensation from your insurer.
Example: If your car is involved in an accident, you submit a claim to cover the repair costs.
This is the amount you must pay from your pocket before the insurance kicks in to cover the rest.
Example: If your excess is ₦10,000 and your loss is ₦50,000, the insurer pays ₦40,000 while you handle the first ₦10,000.
This is the process insurance companies use to evaluate how risky it is to insure you. They check things like age, health, and driving history before deciding your premium or coverage.
A policy is the formal contract between you and the insurer. It outlines the terms, conditions, coverage, exclusions, and how much you’ll pay.
Always go through your policy thoroughly to avoid surprises later.
This is the highest amount your insurer will pay out for a claim. It represents the total value of your coverage.
Example: If your health policy has a coverage limit of ₦1 million, that’s the maximum your insurer will pay for approved medical treatment.
These are situations that your insurance policy does not cover. Knowing your exclusions is crucial.
Example: Some policies won’t cover accidents that happen while you’re under the influence of alcohol.
A short period after your premium’s due date during which your coverage remains active, even if you haven’t paid yet.
If you don’t pay before the grace period ends, your policy might lapse.
A lapsed policy means your insurance has become inactive—often because you missed payments. You won’t be covered unless the policy is reinstated.
Most insurance policies last for a fixed time, such as one year. Renewal means extending the policy for another term by paying the new premium.
This is when insurance companies get their own insurance from other companies. It helps spread large risks so one company doesn’t carry too much financial burden.
The National Insurance Commission (NAICOM) is the government agency that regulates insurance in Nigeria. It ensures companies are licensed and operate fairly.
You don’t need to be an insurance expert, but knowing these basic terms will help you:
Understanding insurance language gives you an advantage—and it might save you a lot of money down the line.
