Understanding Property Insurance in Nigeria: A Beginner’s Guide

This is a beginner’s guide to understanding property insurance in Nigeria. I believe you are one of those many people looking to invest in the lucrative property industry in the country.

Moreover, property insurance is an important way for property owners in Nigeria to protect their real estate investments against damage or loss. This type of insurance can cover residential properties like homes and apartments as well as commercial properties like offices, shops, warehouses, etc.

For first-time buyers or beginner investors in the Nigerian real estate market, it’s crucial to understand what property insurance entails and how it works.

This article provides an overview of property insurance specifically within the Nigerian context.

WHAT IS PROPERTY INSURANCE?

Right off the bat, let’s know what property insurance is all about.

This type of insurance provides financial protection against damage or loss of a property due to unforeseen events like fire, theft, flooding, etc. By paying a monthly or annual premium to an insurance provider, the policyholder transfers the risk of financial loss to the insurance company. If an insured event damages or destroys your property, approved repair and replacement costs will be covered up to the amount specified in the policy.

Property insurance typically only covers the structure of the building itself and not belongings inside.

COMMON TYPES OF PROPERTY INSURANCE POLICIES

Do you care to know the common types of property insurance policies?

In Nigeria, some common standard policy types for property owners include:

• Building insurance – Covers structural damage to the insured building.
• Fire insurance – Protects specifically against fire damage, including from events like electrical faults, wildfires, arson, etc.
• Flood insurance – Covers damage caused by flooding due to natural disasters, burst pipes, etc. This is sometimes an optional add-on policy.
• Burglary insurance – Provides limited protection against theft of property or belongings. Determines payout value based on forced entry evidence.
• Loss of rent insurance – Covers loss of rental income from your investment property if it becomes uninhabitable due to an insured incident.

WHAT DOES PROPERTY INSURANCE TYPICALLY COVER?

Standard building insurance policies generally cover:

• Repair costs – To restore property to pre-loss condition
• Rebuilding costs – If property is completely destroyed
• Professional/architect fees – Relating to repair/reconstruction
• Removal of debris – Demolition/clearing costs after extensive damage

Coverage usually has maximum limits, so understanding replacement value is key when choosing adequate coverage. Most policies also specify exclusions like war, nuclear hazards, terrorism, wear and tear damage, or illegal construction.

FACTORS THAT DETERMINE PROPERTY INSURANCE PREMIUMS

Insurers calculate premiums based on these primary risk factors:

• Property type – Residential buildings have lower premiums than commercial buildings which are seen as riskier
• Location – Properties in areas prone to disasters like floods or coastal storms have higher premium rates
• Coverage amount – Higher coverage maximums equate higher premiums
• Deductible – Out-of-pocket amount paid before insurance kicks in; lower deductible means higher premium
• Protective measures – Things like alarms, fire extinguishers, and safety practices can reduce premiums

HOW TO CHOOSE THE RIGHT PROPERTY INSURANCE COVER IN NIGERIA

A lot of people have always found it difficult to choose the right property insurance cover in Nigeria.

When deciding on an adequate level of insurance for your Nigerian property, consider:

• The current rebuild cost if totally destroyed – Get recent property valuations
• The repair cost if partly damaged – Estimate based on property size/facilities
• Inflation -Rebuild costs will be higher in future than current valuation
• Mortgages – Most banks require property insurance for financing

Also evaluate optional add-on covers like flooding, equipment breakdown, etc. Based on your specific property risk profile.

MAKING A PROPERTY INSURANCE CLAIM IN NIGERIA

If your insured property suffers a valid covered loss, you start the claims process by:

1. Notifying police – If any theft, vandalism or illegal activity is suspected
2. Documenting damage – Take photographs and videos showing extent of loss
3. Initiating claim – Contact insurer immediately with damage report
4. Submitting paperwork – Fill claim forms with proof of repairs, invoices, quotations etc
5. Settling claim – Receive payment after verification checks and excess deductions

The insurer may also send a loss adjuster to inspect damage before approving the claim. Hiring a public claim loss assessor can also help facilitate this.

GAPS IN PROPERTY INSURANCE COVERAGE TO CONSIDER

It might surprise you to know that there are gaps in property insurance coverage in Nigeria.

While property insurance is vital, some key things to remember include:

• Most standard policies don’t cover belongings or contents, only the physical building structure
• There are often coverage sub-limits capping claims below the total insured amount
• Insurers may not pay out claim fully if property is under-insured for its rebuilding cost
• Pre-existing property damage before purchasing insurance will not be covered

For adequate protection, read policy documents carefully, assess risks accordingly and have the building valued appropriately by experts.

CONCLUSION

That’s it in this article on the beginner’s guide to understanding property insurance in Nigeria.

Before we conclude, you should know that property insurance remains an evolving landscape in Nigeria full of opportunities yet beset by challenges around capital, technology and trust.

However, protecting your most valuable asset is a prudent investment for any property owner.

This article covers fundamentals to get started but stay updated on regulations and new products that promote consumer interests. Partnering with a trustworthy insurer and insurance agent or broker is also key to properly safeguard your property against unforeseen losses.