October 25, 2023/Coronation Research

Don’t leave a legacy of debt and stress.

Life is uncertain, especially in Nigeria, with large segments of the population living below the poverty line and fraught with money worries. Most Nigerians work extremely hard to protect and provide for their families. As such, it doesn’t make sense that they often undo their life’s work when they die, leaving their families a legacy of loss, debt, and stress. 

Life insurance is a contractual agreement between an individual and an insurance provider, where the individual pays a regular premium in exchange for a payout to their beneficiaries upon their demise. In a country with limited social security, this payout, known as the death benefit, can act as a safety net for families, ensuring loved ones can avoid debt and continue living decent lives despite the loss of a breadwinner. 

Despite most people hoping for the best, we never know when we will die. Dying unexpectedly shortly after taking out a large loan, buying a car, a business, or a house can leave dependents without an income and significant debt. If surviving loved ones don’t have the skills, savings or means to manage this debt, your death could condemn them to poverty despite having worked all your life to ensure their security and happiness. 

More generally, in Nigeria, a country without government-provided welfare, millions of people dying each year without life insurance are placing a considerable burden of care on extended families and communities. If more people took up life insurance, resources currently consumed by caring for the indigent could be used for education, health, investment, and business development. 

Limited take-up of life insurance

Most Nigerians work so hard in the present to make ends meet that few have time or energy to think of the future. That said, part of being a responsible person and breadwinner demands that we consider the well-being of our loved ones after we have gone.

Despite the advantages of embracing life insurance in Nigeria, cultural taboos around discussing or planning for death prevent many more Nigerians from taking the simple and relatively inexpensive step that can, nonetheless, make a huge difference to the future of their loved ones. 

Huge benefit of Life Insurance

Depending on the detail of the life covers purchased, in addition to providing your loved ones with an income after demise. 

• Life insurance can also protect them from falling into debt. A life cover can, for example, settle outstanding debts, such as mortgages, personal loans or credit card bills. As such, life insurance can prevent your family from being burdened with any financial obligations you might leave behind, especially if you die unexpectedly before all your affairs are settled. 
• One of the primary benefits of life insurance is that it provides a financial safety net for your loved ones in the event of your death. The death benefit paid out by the policy can help replace your income and cover living expenses for your family. 
• Life Insurance can be earmarked for funding your children’s education. This ensures that your kids have the financial resources to pursue their academic goals even if you are no longer there to provide for them.
• Life insurance can be a valuable tool for estate planning. It can help heirs pay estate taxes or cover other expenses associated with settling an estate. It can also be used to leave an inheritance to beneficiaries.
• Life insurance can play a crucial role in business succession planning for business owners. It can provide funds to buy out a deceased partner’s share of the business or help the company continue operations during the transition.  
• More broadly, covers like whole life insurance are insurance solutions that allow you to invest with embedded insurance protection against the risks of demise. The insurance premium is deducted within the investment period, but the insurance cover is for life, even when you have taken the maturity proceeds. The return on investment in this type of plan is flexible but high (Linked to Federal Government of Nigeria Bonds).
• In Nigeria, life insurance premiums paid up to a specific limit are also eligible for tax deductions. As such, in addition to being responsible, purchasing life cover can assist with financial planning while you are still alive. 

However, one of the most intangible yet valuable benefits of life insurance is the peace of mind it brings. Knowing that your loved ones will be protected financially after your demise can offer a sense of security and relief during uncertain times. Life insurance also brings calm and focus by providing the comfort that your family will not be left destitute when you die. Buying the calmness to grow their wealth in the security that this will not vanish or be lost at death provides the focus in the here and now to invest, build wealth and confidently plan even if this might not include you. 

Generosity Born of Love 

Life insurance is a simple tool for ordinary Nigerians to ensure their legacy by helping their loved ones manage and thrive after they leave. Since most people love their families and devote their entire lives to ensuring their safety and comfort, the best and most generous thing to do is to take out life cover. Life insurance is not, after all, for oneself. It is also much more than a financial instrument. Instead, life insurance is a gesture of love and responsibility, ensuring the future of loved ones.