Life Insurance for Employees in Private and Public Sectors
The Federal Government of Nigeria introduced a guideline under the Pension Reform Act of 2004 that made it compulsory for employers to purchase life insurance for employees. The objective of this reform is to establish a uniform set of rules, standards and guidelines in relation to life insurance policies for employees.
The following are the employer guidelines for achieving this:
- The employer will bear all the costs relating to the purchase of this policy for its employees and this will be in addition to and separate from the contributions to be made by the employer to each employee’s Retirement Savings account as required by the Act.
- The life insurance policy will be effected through the purchase of a life policy from a registered insurance company with the authorization and license to conduct life insurance business in Nigeria by National Insurance Commission (NAICOM).
- Employers in the private sector are free to use the services of any licensed and authorized life insurance company or group of insurance companies that are eligible to operate life insurance business.
- Employers are not allowed to self insure their employees.
- The policy covers the insured person against death.
- Insurance policy is for twelve (12) months from January to December which is renewed at the end of each year.
- The premium will be pro-rated as applicable based on the time of the year the employee joins the course.
- When an employee leaves a company before the end of the twelve (12) months, the premium for the remaining or unexpired period before the completion of the 12 months will be set aside or returned to the employer.
- Life insurance for employees is compulsory so long as they are still in employment with the company.
- The insurance companies must ensure that employers adhere to the minimum insurance cover of three times the annual total emolument of each employee. However, employers that have better life insurance policy for their employees in terms of benefits should carry on with theirs.
- When an employee dies, the employer will commence death benefit claims on behalf of the employee, notify the employee’s Pension Fund Administrators (PFA) and National Pension Fund and state the amount receivable and also make sure there are no discrepancies in the payment. In the case of a missing employee, the employer has to report to the police and then to the PFA in order to commence a missing person’s claim.
The decreasing life expectancy in Nigeria due to crime, terrorism and the most recent outbreak of viral diseases has alerted the citizens on the need for life insurance cover. This will reduce the pains the relatives of a dead person will go through in the account of death. Most organizations have recognized the need for life insurance and this has also prompted the Nigerian Medical Association to purchase insurance policies for her members because of the risk and exposure of their members to life threatening sickness in the course of doing their job.
With the recent outbreak of diseases and in line with their vision to enrich the lives of Nigerians, one of the major telecommunication companies in Nigeria, has collaborated with two reputable insurance companies to offer quality, affordable and accessible insurance services to Nigerians. These companies are Cornerstone Insurance Plc and MicroEnsure (a world leader in mobile insurance service). With this cover, interested customers are charged as little as N1,000 each month to qualify for cover, and as they increase their monthly recharge they can earn more cover up to N500,000 and N50,000 for life insurance and hospitalization .
This product, according to analysts is a major development for the nation’s insurance industry quest to deepen market penetration through retail products. The product will encourage the insurance culture among Nigerians, and has already been endorsed by the National Insurance Commission (NAICOM).
At the very least, life insurance will be at the reach of employees in the public and private sectors as well as the self-employed.