A cheaper insurance policy is not always the cheaper option. Sometimes, the real cost only becomes clear when you need to make a claim.
Running a business in Nigeria comes with plenty of uncertainty. Rising operating costs, changing regulations, supply-chain disruptions, theft, fire, accidents, and other unexpected events can all affect a company’s finances and operations.
Insurance is designed to provide financial protection when things go wrong. However, simply having an insurance policy does not mean your business is adequately protected. The policy must reflect the risks your business actually faces.
Here are five common insurance mistakes Nigerian businesses should avoid.
1. Choosing Insurance Based Only on the Cheapest Premium
One of the most common mistakes businesses make is choosing the policy with the lowest premium without comparing the protection it provides.
Two insurers may offer quotations for the same type of cover, but the policies may differ in important ways, including:
•Coverage limits
•Exclusions
•Excesses or deductibles
•Policy extensions
•Conditions
•Claims requirements
A policy costing ₦500,000 may appear more attractive than one costing ₦650,000. However, if the cheaper policy provides significantly less protection, the initial saving could lead to a much larger financial loss later.
Before choosing a policy, ask:
If something goes wrong tomorrow, exactly how much protection will this policy provide?
The cheapest policy is not necessarily the best-value policy. Compare the cover, conditions, exclusions, and claims support—not just the premium.
2. Underinsuring Your Assets
Underinsurance occurs when the value of the assets covered by a policy is higher than the amount insured.
For example, a business may own stock, machinery, and equipment worth ₦50 million but insure them for only ₦20 million. Although the business has an insurance certificate, it may still face a significant financial gap after a major loss.
Businesses should regularly review the value of their:
•Buildings and premises
•Machinery and equipment
•Stock and inventory
•Furniture and fittings
•Vehicles
•Other valuable assets
Asset values can change because of inflation, expansion, replacement costs, or changes in the business. If your company has grown significantly but your insurance cover has remained unchanged for several years, it may be time for a professional review.
Your insurance should grow with your business.
3. Failing to Read the Exclusions
Most policyholders ask, “What does this policy cover?” That is an important question, but it is only half of the conversation.
You should also ask:
What does this policy not cover?
Every insurance policy contains terms, conditions, and exclusions. A business may assume that its property insurance covers every type of damage, only to discover after an incident that a particular event is excluded or requires an additional extension.
For this reason, do not focus only on the benefits listed in a policy. Make sure you understand the exclusions and the circumstances in which the insurer may not be liable.
Insurance wording can be technical. A professional broker can help explain the policy in plain language and identify areas where additional cover may be necessary.
4. Treating Insurance as a Once-a-Year Transaction
Your business is probably not the same today as it was 12 months ago.
You may have purchased new equipment, increased your inventory, opened another branch, employed more workers, started importing goods, taken on larger contracts, or added company vehicles.
If your insurance policy has not changed alongside the business, there may be a gap between your current risks and your current protection.
Insurance should therefore be treated as an ongoing risk-management exercise, not simply as something to renew once a year. Notify your insurer or broker when there are significant changes to your assets, operations, staffing, contracts, or premises.
Regular reviews can help ensure that your policy remains relevant as your business develops. NAICOM’s market-conduct guidance also emphasizes proper policy servicing and helping policyholders understand their insurance relationship and coverage.
5. Waiting Until a Loss Occurs Before Understanding Your Policy
After a fire, burglary, accident, or other major loss, the last thing you want to do is search for basic information about your policy.
You should already know:
•Who to contact
•How quickly the incident must be reported
•What documents are required?
•Whether the event is likely to be covered
•What immediate steps should be taken to protect the remaining property?
Keep your policy documents and important contact details accessible. Make sure key members of your management team understand the claims process and know what to do if an incident occurs.
Under Nigeria’s insurance framework, admitted claims are generally expected to be settled within the applicable statutory period after notification, subject to the relevant legal provisions. Where documentation is incomplete or liability is declined, the policyholder should be informed of the reasons within the applicable period.
Because claims requirements may vary by policy and circumstance, businesses should confirm the relevant process and timelines with their insurer or broker before a loss occurs.
Good preparation can make a difficult situation much easier to manage.
How Nigerian Businesses Can Improve Their Insurance Protection
Instead of asking only, “How much does the insurance cost?” start with a more important question:
What could seriously damage my business financially, and how can I protect against it?
A proper insurance review should consider your:
•Assets and equipment
•Employees and workplace responsibilities
•Customers and third-party risks
•Business operations
•Contracts and legal obligations
•Revenue and cash flow
•Potential liabilities
•Business interruption risks
The right insurance program should be built around these risks. It should not be copied from another business or selected solely because it has the lowest premium.
A professional insurance broker can help you review your existing policies, identify gaps, compare suitable options, and support you through the claims process. Brokers can also assist with professional advice, policy servicing, renewals, and claims facilitation.
Is Your Business Properly Protected?
Having insurance is a good start, but the more important question is whether your cover is adequate for the risks your business faces today.
At Liberty & Trust Insurance Brokers, we believe insurance should be more than a document kept in a drawer. It should be a practical risk-management tool that helps protect the business you have worked hard to build.
Whether you run a small business, manage a growing company, or oversee a large corporate organization, your insurance program should be
based on your actual risks—not a one-size-fits-all approach.
based on your actual risks, not a one-size-fits-all approach.
Do not wait for a loss to reveal a gap in your insurance. Contact Liberty & Trust Insurance Brokers for a professional review of your business insurance needs.