Student welfare plan – Francis Ewherido


Francis Ewherido

Very soon schools will resume, but some students will not go back to their schools. They will resume at less expensive private schools or resume at government-owned schools.

That is because some of these students lost their breadwinners just before or during the holiday. This year alone, I know a handful of people in their 40s and 50s who have died.

Take any day of your choice and go through all the newspapers; you are likely to find an obituary of somebody within this age range. The cause of death might range from accident and illness to death from armed robbery or kidnapping.

Our country is going through precarious times and life has become more uncertain. Insurance is about insuring these uncertainties. If the uncertainties we currently face in Nigeria were to be experienced by people in advanced countries, the demand for life insurance would have soared by now.

But many Nigerians do not want to hear anything about life insurance or life insurance products that remind them that they are mere mortals.

A female marketer narrated her experience with a proprietress of a school. She went to sell an insurance product to the school that takes care of the school bills of students if their parent/sponsor/guardian dies. “I reject it in Jesus name,” the proprietress screamed. “Nothing shall happen to the parents of my students.

They shall live to enjoy the fruits of their labour…” she continued ranting, sorry praying. When she was done, she practically chased the female marketer out of her school. I say amen to her prayers. I am sure many insurance practitioners will do same.
But those people in their 30s, 40s and 50s, who are dead, are some of them not parents whose children are still in school? I belong to an NGO with a soft spot for widows. We have handled countless cases of widows who come for assistance to pay their children’s school fees. One advice we give to them is that since their husbands are late, they should withdraw the children from private schools to government schools, which are affordable. Some break down in tears at the suggestion; others refuse to commit what they consider to be class suicide. In one particular case, the widow did tell her daughter, but she refused and stayed at home for a whole year, rather than go to a public school! That was what prompted the widow to come back for help. But all these would have been avoided if their husbands had subscribed to an education insurance plan for the children.

Death is real and inevitable. We must all accept that painful reality. Even more frustrating and distressing is the fact that nobody knows when death will come; even those who are terminally ill only know it is near. They do not know when death will strike. It is totally outside our control, but we have some control over the after effect of our death. That is what the various life insurance products are all about. No insurance company prays for the occurrence of the event it provided insurance for. Non-occurrence of losses means less money is spent in claims payment and more profit for the insurance companies. Insurance practitioners are just realistic people who have accepted the fact that deaths will occur; accidents will happen and there will be fire incidents. All we do is provide succour in the event of these occurrences of risks insured against. We are solution providers.

Traditionally, life insurance is a contract between an insurance policyholder, otherwise called assured or insured, and an insurance Company or assurance company, called insurer or assurer, where the assurer promises to pay a specified beneficiary a sum of money in exchange for a premium, upon the death of an assured person. The term “assurer” is more often used for life insurance companies, while insurer is used for non-life insurance company, but they are often used interchangeably. Depending on the contract, the policy can be extended to cover other events such as terminal illness or critical illness and funeral expenses. The policy holder typically pays a premium, either regularly or as one lump sum.

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The insurance market has grown and assurance companies now offer a wide range of life assurance products to deal with virtually all circumstances of human existence as long as life and death are involved. Life assurance is broadly divided into term assurance and endowment policies.

Term assurance is life insurance that provides coverage for a specified period, mostly one year. Thereafter, the assured may renew the policy on existing terms or renegotiated terms. Unlike endowment policies, term assurance policies do not accumulate cash value. If the assured dies during the term, the death benefit will be paid to the beneficiary. But if nothing happens, there is no payment when the policy lapses. Term insurance is comparatively cheaper; it is also a smart way to make financial provisions for loved ones in the event of death, especially those with young families. As the assured grows older, his premium increases. This is based on the assumption that older people are more likely to die than young people, all things being equal. But we know they are never equal.
One term assurance product that takes care of students who lose their parents/sponsors/guardian is the welfare plan for students. Here the school subscribes to the plan and the parents pay premiums, which can be as low as N10,000 per annum, depending on the school fees and other bills and the number of students in the school. In exchange, if a parent, guardian or sponsor of a student’s dies, the scheme takes over the student’s fees and other specified expenses until the student graduates as long as the school renews the policy annually. If the schools of the children of the widows I mentioned earlier had this policy, the widows would not have had cause to come to our NGO for assistance.

If the school your children attend does not have this policy, you can make your individual assurance arrangement, although the premium might be slightly higher because insurance works on numbers: the more policy holders you have in a scheme, the lower the premium. Usually some parents plan ahead and take up education endowment policies for their children. Unlike many term policies which are annual, subscribers to education endowment policies choose the number of years they want to run the policy before maturity. Many assurance companies stipulate five years minimum before maturity for education endowment policies. The policy holder chooses his sum assured and the policy tenure and the assurance companies compute the premium. The assured has the option of paying monthly, quarterly or annually.

At maturity the sum assured is paid to the policy holder. But if the policy holder dies before the maturity of the policy, his beneficiary is entitled to the full assured. For instance, if the sum assumed is N20m and the policy holder only paid N4m before he died, his beneficiary is entitled to the full sum assured of N20m. In addition, if, for instance, after four years, the policy holder loses his job and is unable to continue paying the premium, he can terminate the policy and the assurance company will pay him what we call surrender value (the premium he has paid minus deductions for administrative charges).
These policies have one thing in common: they provide immediate and bulk financial relief to the assureds or beneficiaries in the event of an occurrence insured against. For people without reasonable savings – and they are in the majority – payments from term policies are game changers on the occurrence of risks insured against. Talk to a Registered Insurance Broker (RIB) today.

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