term insurance
Term Insurance is life cover that pays your family a lump sum if you die within a fixed period, and pays out nothing back to you if you outlive it.
In plain English
A man in Yaba pays ₦4,500,000 for a plot of land, and the day he finishes paying, he owns something. A man in Surulere pays ₦8,000 a month for a life policy, and if he is alive at the end of the term, he owns nothing from it at all. Both men made a sensible decision. They were just buying two completely different things.
Term insurance is the second man's product. You are not buying property, you are buying protection for a set number of years, say 15 or 20. If you die during that window, your family receives the payout, called the sum assured, and it can be millions of naira. If you live past the term, healthy and grumbling about how much you spent on premiums, the policy simply ends. No refund, no regret, because what you actually paid for was the peace of mind, not a return.
This is why term insurance is the cheapest way to protect your family's income. A 35 year old Nigerian civil servant might pay around ₦15,000 a year for ₦10,000,000 of cover over 20 years, because the insurer is only promising to pay if the worst happens in that stretch, and statistically, most people in that age group make it through fine. That is the whole trade. Low premium, no savings component, pure risk cover.
Diaspora Nigerians use it well too. A woman in Manchester sending money home to her parents in Owerri might take out a term policy so that if anything happens to her, there is a lump sum waiting for her family instead of them suddenly losing that monthly support with no warning.
People sometimes feel cheated that they cannot get anything back at the end of the term. But that is like feeling cheated that your fire extinguisher never got used. You did not fail, the house simply did not burn down.
Chidi, aged 30, buys a 20 year term policy with ₦20,000,000 cover for about ₦18,000 a year. If he dies in year 12, his family gets ₦20,000,000. If he is alive and well at 50, the policy simply ends and he stops paying, no payout, no refund.
Questions people ask
Why would I pay for years and get nothing back if I survive the term?
Because you were not saving, you were buying protection for a fixed window. The 'nothing back' is the same as a car not crashing after you insured it, the cover did its job by simply standing ready.
What happens if the term ends and I am still alive?
The policy lapses and you can usually renew for another term, though premiums rise with age, or move to a different type of cover such as permanent life insurance if you want something that pays out eventually no matter when you die.
Is term insurance better than saving the same money myself?
They solve different problems. Term insurance gives your family a large lump sum immediately if you die early, something personal savings usually cannot match in the first few years, while savings grow slowly and belong to you either way.
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