One of the lessons to be learnt from the Coronavirus pandemic is the need to have adequate insurance cover. Insurance plans bring little return on investment, so we do not recommend them as optimal investment assets. However, they are essential for the protection of our wealth. Without insurance, we would need to liquidate assets to meet financial emergencies, but with insurance, our assets are preserved because the insurer pays for the emergencies. Apart from the more obvious coverage for life and health, there is now a need to consider other types of insurance protection against the emerging perils we are facing currently. Some of these additional protections may be in form of add-ons to existing policies.

Let us look at the typical life insurance policy. The policy holder contributes the premium for the stipulated time; if he outlives the contribution period, he collects the benefits, if he does not, his beneficiaries collect the benefits. But life policies now have many varieties which should be included in order to cover all the likely perils a person could face. There is the Unemployment Clause – in this instance, the Insurer would not penalize the policy holder if he is unable to pay his premium due to unemployment. In some policies, the insurer would continue to treat the policy as if premium is up to date. In other cases, the insurer pays the policy holder a monthly stipend for a stipulated period or even until he is able to find work again. Disability Clause, in this case, the insurer pays the policy holder a monthly stipend if he becomes disabled and is unable to work during the contribution phase of the policy.

Some of us have Group Life Insurance policies, which we were automatically registered for by our employer when we resumed working for the organization. For this policy, the next-of-kin registered with the HR department is automatically made the beneficiary. Some of us started working when we were single and unmarried. Have we updated our next-of-kin? Should your beneficiary continue to be your younger brother, when you now have a wife and three teenage children? Let us ensure our records are up to date both with our employer and our insurers.

Health Insurance – Some of us are blessed with jobs that provide healthcare for us and our dependents. For others, there is a need to make adequate provision for our healthcare. With the introduction of the National Health Insurance Scheme, came the Health Management Organisations HMOs. These have introduced different healthcare plans with value-added services. From as low as N3,500 per month, comprehensive healthcare can be provided for a family.

There are HMOs that provide telemedicine services that allow clients to receive medical consultations from doctors in the comfort of their homes via their mobile phones. This removes the stress of going to the hospital and waiting to be attended to. With the COVID !9 pandemic lock-down that restricts movement and also the very real risk of being infected if you go to a hospital, getting a Health Insurance policy with a telemedicine facility has become necessary.

With the easy payment models and creative value-added services, we have no reason not to provide comprehensive healthcare for our families. However, we must be careful to read what our policies cover choose the policy that meets all your family’s needs, so you are not left looking for money when medical emergencies occur.

No one can foresee untimely death but preparing adequately for dependents takes away some of the pain associated with the loss of a breadwinner. An education plan can help ensure that children get the level and the quality of education they would have received if both parents were alive. Education plans are available from investment firms, trust companies and insurance providers. A plan from an insurance company has the added benefit of full payment in the event the parent dies before contribution to the plan is complete. However, non-insurance companies have started adding that clause to their education plans. Ensure you read the fine prints to confirm that you are getting what you are paying for.

SMEs need to look at bespoke policies or add-ons that protect their businesses from today’s perils – business interruption, force majeures, supply chain failures, market failures, professional liability, workers compensation and others.

Finally, we must exercise due diligence in selecting our Insurer.And because these policies are long term (over 25 years for life policies), fresh due diligence exercises must be done periodically afterwards to confirm that the Insurer remains financially capable to protect our lives, our dependents and our wealth.

Happy Investing.

Emergencies not only affect present circumstances; they threaten future well-being if not properly managed. Arming ourselves with an emergency fund would make life’s emergencies easier to navigate.

The last few weeks have been particularly challenging and eye-opening. Many have faced dire financial situations. Others have come to realize how financially vulnerable they are. Yet, some have been able to ride the storm with more confidence. The Coronavirus lockdown has prevented small business owners and the self-employed from working and earning daily income. Some employees of big businesses have their salaries reduced, were sent on leave-without-pay or had their employments terminated. Even those whose salaries were not reduced, knew that their incomes were seriously at risk as their employers would not continue paying them indefinitely.

So, how did you fare financially under these circumstances? Was your income reduced? If yes, were your savings enough to sustain your lifestyle and living expenses during the lockdown? If the lockdown lasts for six months, would you still survive well? We know it is not only a general lockdown that can prevent us from working and earning an income; illness, labour strikes, force majeure on our employer’s premises etc. can prevent us from working. The two main ways to prepare for such a situation is Insurance and Emergency Fund.

A life insurance policy that pays out a monthly salary when you are u

However, Emergency Savings Funds are the most common way to survive when we face financial emergencies. The rule-of-thumb states that your emergency fund should cover at least six months of your normal living expenses. Many of us have complained that we cannot afford to save, but this lockdown has demonstrated that we cannot afford not to save. Savings via emergency funds are critical in the times we are living in; and any responsible adult with dependents must have one. Calculate your minimum six-month Emergency Fund figure and start saving towards it.

No amount is too small to start. N1, 000 monthly for one year gives you N12, 000 Emergency Fund that you otherwise would not have. But strive to save a minimum of 10 per cent of every inflow–salary, bonuses, monetary gifts, investment income. Start with whatever you can now and increase gradually to 10 per cent and above. Look out for ways to reduce your expenses and increase your savings ratio e.g. packing lunch from home; entertaining guests at home; using energy saving bulbs; using the cheapest telecoms package; carpooling for school pickups etc.

This underscores the importance of recruiting every household member into a financial intelligence mindset. The best way to save monthly is to set up a Standing Order with your bank – once your salary is paid, the savings should be deducted and moved to your savings account before you can access it. For obvious reasons, we should not have ATM cards or e-banking services for savings accounts. The Ajo/Esusu savings method is also a highly effective savings strategy, so long as we have a good hold on every group member (e.g. all members work in the same organization) and the money collected is used for investment and not consumption.

We all know it is financially naive to keep six months living expenses in low yielding savings accounts; we must invest them in higher yielding assets. However, because the money is an emergency fund, it should not be invested in illiquid (difficult to convert to cash) assets like real estate. The fund should be in cash or near-cash assets like fixed deposits, treasury bills, commercial papers, money market mutual funds or bonds which can easily be liquidated and converted into cash as soon as you need it. Therefore, you should instruct your bank to transfer your savings balance to the preferred investment vehicle whenever the balance reaches a predetermined threshold. Re-investing 100 per cent of the interest earned back into the assets accelerates the achievement of the emergency fund target figure. Ensure you do your due diligence on any asset you are investing in. Every asset in your Emergency Fund must be easy and quick to sell and convert to cash, so you would not be stranded when an emergency happens and the whole purpose is defeated.

Many of us are familiar with mobile apps. We have games, health trackers, learning portals, Bibles, social media and much more on our phones. How many of us have personal finance management (PFM) apps? For those of us struggling with financial discipline, mobile fintech apps would definitely help to push us a long way towards meeting our financial goals.

Many of us are familiar with mobile apps. We have games, health trackers, learning portals, Bibles, social media and much more on our phones. How many of us have personal finance management (PFM) apps? For those of us struggling with financial discipline, mobile fintech apps would definitely help to push us a long way towards meeting our financial goals.

In view of the low interest rate regime and the current negative growth in the stock market, it is necessary to explore alternative investment options. Investing in profitable businesses managed by competent people is one of the most profitable ways of investing and generating additional streams of income.

We observed that the simplest way of hedging is obeying the common maxim – do not put all your eggs in one basket.  This is done via portfolio diversification. How do we diversify our investment portfolio without spreading ourselves too thin?

“Insurance helps protect our investments and wealth, so we do not face financial ruin in the event of negative occurrences. Let us use it to our advantage.”

As we plan our financial future there are obstacles that pose risks to our financial well-being and prosperity. Life is full of surprises and the financially intelligent are wise enough to proactively cater for unpleasant surprises and manage risks like accidents, poor health, disability, burglary or death.

The most common way to manage personal risks and reduce the attendant financial losses is Insurance. It is designed to provide a cushion to absorb some of our losses and help us to recover quicker than we could have without their protection. Yet many do not have adequate insurance protection. Some consider it to be morbid and a demonstration of insufficient faith in God. However, insurance is not just about preparing for death. Others have a fundamental distrust of insurance companies due to countless occasions when the latter have not met their contractual obligations to the insured but instead left claims unpaid. Since we do not want to be accused of throwing away the proverbial baby with the bath water, we should buy suitable insurance products from credible insurance companies and do our own part by paying our premiums as and when due.

Non-Life products cover perils like accidents, fire, burglary, flood etc. Many business owners would have recovered faster from road accidents if they had adequate ‘goods in transit” insurance cover. If the landlord insures the house and tenants buy ‘householders insurance’’ to covers the contents, both of them would recover faster in the case of a fire or thunderstorm.

The Federal Government has made Health Insurance compulsory for all eligible salary earners, but that excludes millions of other Nigerians who are yet to benefit from the scheme. Unexpected health complications have a double negative effect – first they drain us financially and then prevent us from going back to work to earn more money, resulting in devastating financial consequences. When this happens some people would blame destiny, but destiny could have been helped with health insurance to provide quicker, more robust medical attention that would have resulted in fuller and faster recovery.

Many Investment products have a Life Insurance component. For instance, a Children’s Education Product bought from a Bank may pay out only the amount contributed for a child’s education to the child if the parent dies before the product lifecycle is completed. However, an education product from an Insurer would pay the Total Product Face Value to the child (irrespective of amount contributed by parent) because the Insurance product carries a Life Insurance component. So if the parent dies, at least the child would not need to worry about financing his education. Some retirees under the Contributory Scheme are now collecting all the proceeds of their Retirement Savings Accounts (RSA) from their PFAs and using it to buy Insurance Annuities. This is wise because the PFA would only disburse the total amount in the RSA (contributions and income earned) to the retiree. So if the retiree outlives the money, the PFA cannot help him. However, an Insurance Annuity is committed to the retiree throughout his life.

Credit Protection Policies are used to protect a property bought with a loan. So that if either due to disability or death a borrower is unable to complete repayment of the loan, the insurance company would pay the balance to the Lender so the Borrower/ Dependents would not lose the property.

Life insurance products are either term or whole life annuities. Term products are for a specified periods e.g. 25 years (but carry a provision to pay full product face value to the beneficiaries in case the insured dies, irrespective of amount contributed); whilst the whole life annuities only pay upon death of the insured. Term products are an additional way of saving towards retirement (due to the long tenure), whilst at the same time providing a financial cushion for one’s dependents in the event of one’s death. By the time the insured is collecting the proceeds of the Term Insurance, his dependents should have matured enough to cater for themselves financially and so would no longer need insurance protection.

Insurance investment products however, do not generate high returns on investment (ROI) simply because of the additional Life risks that the Insurer has to bear. Therefore, in order to get optimum ROI from our Investment Portfolio, only the vital Insurance products should be purchased.

Insurance helps protect our investments and wealth, so we do not face financial ruin in the event of negative occurrences. Let us use it to our advantage. Happy investing

Many of us regret that we did not learn better financial management skills at an early age, therefore, we must ensure that our children do not grow up with the same disadvantages. Here are some useful tools for teaching younger children Personal Finance Skills.