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SubjectFree lesson

Insurance II

ClassNotes Team 5 MIN READUPDATED 12 JUL 2026

Commerce SSS2 Third Term

WEEK  2

Insurance contd

Performance Objectives

The student should be able to:

    1. Describe the various types of insurance.

    2. Differentiate between life insurance and non-life insurance.

Content

Types of Insurance

There are different types of insurance which can be grouped into the following:

A.  Life Insurance

Life insurance is the type of insurance policy that covers an event that is certain to happen. This type of cover is often referred to as assurance rather than insurance. There are two major types of life assurance and they are:

1. Whole Life Policy: Whole life policies provide for payment after the death of the insured regardless of when the death occurred. Premiums are usually paid quarterly or annually by the person whose life is insured or by his spouse. The idea is that when the insured dies, someone will benefit from the policy, for example, a spouse or a dependent.

Benefits of Whole Life Policy

I. It provides for the welfare of the dependents in the event of death.

II. It could be used as collateral for a bank loan.

III. It could be used to provide for policyholder’s funeral after death.

IV. The policy has the potential of increasing value.

V. The cash value can be borrowed for some unexpected expenses.

2. Endowment Policy: This policy provides payment of a basic sum at a certain age or on the death of the insured, whichever occurs first. This provides not only for the dependents but also a useful sum of money for the insured if they survive the period covered by the policy. The insured pays a monthly premium. An endowment policy, there are variations that can be built into it such as;

a. Family income benefit cause: This policy provides that the family of the policy holder be paid a stated amount at intervals until the policy is discharged in event of premature death.

b. Double-accident benefit: This provides that double the amount assured be paid to the dependents of the policyholder in the event of an accident, not a natural cause.

c. Children’s education cause: This provides that the amount assured be paid to the children for the purpose of their education. The main purpose of this policy is that the insured is rest assured that the family will be able to go on with life even if he is not around.

Benefits of Endowment Policy

I. The benefit is paid at the end of the term.

II. It also allows the policy holder to cash a sum of money if they survive the period covered in the policy.

III. Annuities: This is a form of pension in which an insurance company, in return for a certain sum of money, agrees to repay this money plus the investment income that it is able to earn over an expected period of time.

IV. Term Assurance: This is the oldest form of assurance policy. In this policy, payment will be made to the assurer if the life assured dies within the specified period.

B. Non-life Insurance

1. Motor Vehicle Insurance: Motor vehicle insurance provides coverage for any loss the policyholder or owner of a car may suffer through damage to car or persons as a result of an accident. There are different forms of motor vehicle insurance. They are;

i. Comprehensive policy: This covers damage or loss of the insured vehicle even to the third party. It is a comprehensive cover for an insured vehicle which is lost, damaged by accident, fire, theft and third party. This policy attracts a higher premium and pays indemnity for any justifiable damage.

ii. Third-party only: It covers liability for damage to the third party of the insurance policy and not the owner of the insured vehicle. It covers damage to the vehicle of the third party and liability for injuries or death to the third party. The premium for the third party is low, It is mandatory for vehicle owners to insure against the third party in Nigeria.

iii. Third-party, fire and theft: It covers for all events that the third party covers for, and in addition covers for damage or loss as a result of fire or theft. It attracts a higher premium to the third party but it is lower than comprehensive.

2. Liability Insurance: This type of policy covers the risk of liability for the injury or death of someone else. There are two main forms;

i. Employer’s liability: It covers the employer’s legal liability for the safety of each employee.

ii. Public liability: It covers the liability of individuals and business for the members of the public visiting their premises.

3. Fidelity Insurance: Fidelity insurance is used particularly by businesses to protect against loss by fraud and stealing by employees. The policy pays for the financial loss arising from the dishonest acts of an employee. It can only pay to the maximum amount specified for the employees. Fidelity insurance usually falls into two categories;

i. Money and securities coverage pays for losses of money and securities taken by burglary, robbery, theft, disappearance and destruction.

ii. Employee dishonesty coverage pays for losses caused by most dishonest acts of an employee, such as embezzlement and theft.

4. Fire Insurance: Fire insurance provides against losses caused by fire, lightning and removed of property from premises endangered by fire. The insured pays an amount regularly to the insurer who will indemnify the insured in the event of damage or losses caused by fire; it covers other perils such as explosion, riot, strike, terrorism, natural disasters etc.

5. Burglary/Robbery/Theft Insurance: This policy covers the insured against loss of property due to burglary/robbery/theft. An insurance company undertakes to compensate the insured in the event of burglary/robbery/theft. Burglary has to do with forcefully entering into the building to steal. Robbery is the act of forcefully taking a valuable from someone. Theft is similar to burglary except that the perpetrator does not enter the building illegally.