Group Life Insurance:
Section 9(3) of the Pension Reform Act 2004 makes it compulsory for every employer of labour, with five employees or more, to maintain a life insurance policy in favour of the employee for a minimum of three times the annual total emolument of each employee. The purpose is to make provision for the dependants of the employees who die in service. It involves both public and private individuals and under this law, they are required to pay for pension subsidy in the event of mental or physical disability, death or disappearance while insured. The penalty for default is a fine of N250,000 or one-year imprisonment or both.
A Group Life Insurance contract covers the members of a particular group. The group could be employees, members of a club, society, association, etc. It provides financial compensation in the event of the death of a member of the group. In the case of employers, Group Life Assurance Policy or Death-in-Service Benefit Scheme is a contract of insurance designed to provide for the payment of a Capital Sum (Sum Assured) to the dependents of an employee who dies while in service of the employer.
This form of insurance is the cheapest form of Assurance Cover and the cost is borne by the employer. The underwriting requirements are very favourable and not as stringent as in Individual Life Cases.
One of the main benefits of group life insurance in Nigeria is that it provides financial security to the families of employees who may pass away unexpectedly. The insurance payout can help cover funeral expenses, pay off outstanding debts, and provide ongoing financial support for the deceased employee’s dependents. This can be especially important in a country like Nigeria where many people live paycheck to paycheck and may not have savings to fall back on in the event of a family member’s death.
Another advantage of group life insurance is that it can be an attractive employee benefit that can help companies attract and retain top talent. Many job seekers look for companies that offer comprehensive benefits packages, and group life insurance can be a valuable addition to such packages.
However, there are also some challenges associated with group life insurance in Nigeria. One of the major challenges is the low level of insurance penetration in the country. Many Nigerians are still not familiar with insurance and may not understand the benefits of group life insurance. In addition, there may be issues with the affordability of insurance premiums, especially for small businesses or organizations with limited financial resources.
Another challenge is the issue of trust. Many Nigerians may not trust insurance companies due to the perception that they may not pay out claims or may engage in fraudulent activities. This can be especially true in cases where the policyholder is an individual and not a large corporation or organization.