What is general insurance?
General Insurance is a financial product sold by insurance companies to help protect you and your most valuable assets in the face of damage, loss or theft. Whether you choose to insure your home, car, electronics or travel plans, there are sure to be insurance policies that will suit your financial status and meet your coverage needs.
How does insurance work?
When you choose a policy that suits you and the needs of you or your family, you begin to pay regular payments, known as premiums, to the insurer. This money then joins into a pool of funds along with thousands of other people who share the same policy as you. If you are then victim to an unfortunate calamity, you would make a claim to the insurer who would then pay out funds from the pool or replace the lost items according to your policy agreement. This concept of pooling the risks of many to reimburse the loss of individuals is not only applied in Nigeria, but a successful model all over the world since many centuries already.
How are premiums calculated?
Insurance rates are calculated using risk data of the person willing to insure, its asset to insure and his/her environment. This data is analysed to work out what the likelihood of you being involved in unfortunate happenings. The more likely you are to be involved in a calamity, the higher the risk and the higher your premium.
Car insurance, for example, is perhaps one of the most popular types of insurance as it is required by law in Nigeria. Like all insurances, car insurance rates are assessed based on risk. This means that the insurance provider will calculate the risk of you making a claim and base your premium on that level of risk.
Car insurance carriers have found that certain factors affect your chances of getting into an accident, so they use those factors to determine your premiums which include:
- Your driving record
- Your vehicle's make, model, and year
- Your age, gender, and marital status
- Your occupation
- Your claims history
- How many miles you drive per month/year
If you are a low-risk driver, your insurance rates will be much cheaper than a high risk driver who will have to pay higher premiums. Finding the most affordable rates for you can become quite a difficult task which often leaves people paying higher rates than should.
It is important to remember that not all companies calculate risk the same way, comparing company rates before joining an insurance policy can save you a lot of capital in the long run. The best way to do this is to compare car insurance rates online through an online portal such as TopCheck which provides free and transparent quotes and comparisons of car insurance carriers in Nigeria.