Home insurance is a type of property insurance which ensures that your home and your belongings within it are protected from damages like burglary, fire, theft, or even disaster.
The incidence of natural disasters like earthquakes, floods, hurricanes, volcanic eruptions which have led to both a loss of life and property has made home/property insurance very important.
However, the importance of home insurance in Nigeria is usually underemphasized maybe because we are blessed to not have incidences like the above-listed.
But we cannot ignore the fact that we are not free from other disasters like fire incidences, flooding, etc
Therefore, home insurance is very necessary for a variety of people, ranging from homeowners to those living on the rented property.
In fact, in order for you to get a mortgage in Nigeria, one of the most basic requirements a majority of the lenders ask for is home insurance.
It should be noted, however, that home insurance in Nigeria does not cover situations where damages arise as a result of terrorism, riot, or war.
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Furthermore, home insurance does not cover damages resulting from general bad maintenance of one’s property resulting to wear and tear or breakdown in the state of the property.
With this in mind, let us examine the different types of home insurance coverage offered in Nigeria.
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Home Insurance Coverage in Nigeria
There exists 3 different types of home insurance coverage in Nigeria and they include:
Actual cash value
This coverage gives the company the right to provide compensation in terms of monetary value after deducting the level of depreciation in the value of the house and the items within it.
This means that the insurance company will not pay the affected individual for the actual cost of the house and its properties but its present value based on factors such as damage to property and current market value.
Replacement cost
As the name implies, this type of coverage enables the insurance company to provide you with cash that will enable you to rebuild your house to its original value and replace your properties without taking into consideration or deducting the rate of depreciation of those items in terms of market value or damage.
Guaranteed (or extended) replacement cost
This is an extended version of the Replacement Cost coverage in the sense that the insurer will pay for the total cost of building the home and replacing its items while also taking into consideration the possibility of inflation of the materials used to build the home as well as its properties.
Therefore, this coverage will provide all the needed monies even it is more than the limit of the policy which one opted for.
However, the insurer will not provide over 20-25% than the limit.
Home Insurance Policies in Nigeria
There are two types of home insurance policies in Nigeria and they include House Holder’s Policy and Home Owner’s Policy
House Holder’s Policy
This type of home insurance covers a private residence or a rented house.
In this policy, damage to personal belongings, including jewelry, furniture, important documents, money safely secured, and other valuables within the rented property, is covered.
This type of policy might not seem appealing to the majority of individuals that leave in rented apartment merely because they believe it to be a waste of money to insure another person’s property.
However, it should be noted that there are valuable possessions that one has in that same apartment that can be lost in the event of a disaster occurring.
Therefore, it is advisable to take the right step and take insurance for that home.
Home Owner’s Policy
This type of home insurance policy caters to individuals who own their homes and it covers both the property and the belongings within the property.
The cost of this type of policy usually depends on the value of both the house and the properties within that house.
Under the home owner’s insurance policy, there are two forms of insurance one can select from and they include:
Named Perils Policy
This policy caters to losses as a result of only specified or named causes like burglary, flood, theft, fire, or natural disasters.
This policy will not cover losses as a result of damages caused by any incident not listed, specified, or named in the policy.
As of 2013, the cost of having a named perils policy in Nigeria, according to AABNigeria, was between 0.25 to 1.5 percent of the total cost of your house including your belongings within it.
However, as a result of the state of the economy, this figure cannot be relied on because of the rate of inflation that has taken place between 2013 and the present.
All Risks Policy
This type of home owner’s policy covers every form of risk which can lead to loss of property and belongings.
This excludes loss resulting from acts of terrorism, war, or riot.
AABNigeria also in 2013 put the cost of having an all-risk policy in Nigeria at between 2-3 percent of the total cost of the property as well as the belongings within it.
This is significantly higher than the named perils policy but provides more value and eliminates the possibility of exclusion of every kind of risk.
NAICOM
In Nigeria, one runs the risk of falling into the hands of fake insurance brokers who in turn sell fake insurance policies to individuals.
As a result of these reported cases, The National Insurance Commission was established as a statutory agency of the Federal Government of Nigeria to regulate and supervise the Nigerian Insurance Sector.
The commission which was established in 1997 has as its principal objective to ensure the effective administration, supervision, regulation, and control of insurance business in Nigeria.
Therefore, insurance companies and brokers fall under the regulation of this commission.
In 2016, the commission released the names of all qualified insurance brokers in Nigeria numbering 300 thereby making it easy to identify the fraudulent organizations.
Conclusion
With the advent of technology, Nigerians can now access any information they want with ease.
Therefore, before one decides to take any insurance policy with any insurer, they must make sure that they conduct proper research, ask the right questions, look for experts in the field to seek for advice, etc.
This will ensure that you do not fall prey to fraudulent companies.
Finally, do not underestimate the importance of home insurance for you as it can make the difference between making you a bankrupt and bitter individual or a grateful, hopeful and satisfied one.