Life Insurance and Pensions
This domain covers life assurance products, standard policy provisions, and Nigeria's contributory pension system under the Pension Reform Act 2014 - the area where candidates most often confuse the insurer's role with the pension operator's.
Life products
- Term assurance pays only on death within the term; no maturity value, lowest premium.
- Whole life pays on death whenever it occurs, with premiums for life or to a chosen age.
- Endowment pays on death or on survival at maturity - it bundles protection with savings.
- Annuities convert capital into income; distinguish immediate from deferred, and note the guaranteed period.
- Unit-linked policies shift investment risk to the policyholder.
Underwriting turns on age, health, occupation, smoking and sum insured; medical evidence and family history justify extra premiums, exclusions or declinature.
Policy provisions to quote
Grace period for late renewal premiums, lapse and non-forfeiture, surrender value, reinstatement on evidence of insurability, incontestability and suicide clauses, and policy loans. Nigerian law requires life business to be written by a company that does not carry on general business.
Pensions under PRA 2014
PenCom licenses Pension Fund Administrators and Custodians. An employee contributes 8% of monthly emoluments and the employer 10%, credited to a Retirement Savings Account. Employers must also maintain group life cover of at least three times annual total emoluments, with benefits paid to named beneficiaries or through a will or letters of administration.
Worked example
Basic + housing + transport = ₦300,000 monthly. Employee: 8% = ₦24,000. Employer: 10% = ₦30,000. Total credited monthly = ₦54,000, or ₦648,000 a year before investment returns. Group life cover = 3 × annual emolument of ₦3.6m = ₦10.8m.
Traps
Confusing the employer's 10% with the 18% total. Assuming the employer manages the RSA - the PFA does. Treating term assurance as having a surrender value.