Investigation

Securing children’s future via insurance in the event of parental deaths

A child’s education is, undoubtedly, the main concern of any parent. And good education, many believe, is the most precious legacy any parent can leave for his or her child. In this report, ISIOMA MADIKE, looks at how parents can make provision that will secure the future of their children in case of disability or sudden death

Anthony’s ambition was to become a civil engineer. But his dream was terminated when his father suddenly died in 2015. That death caused Anthony’s education to stop abruptly at Junior Secondary Class (JSS1), as there was no one to sponsor his education. Today, Anthony hawks ‘pure water’ at Ojota Motor Park.

“I wanted to become a civil engineer,” he told this reporter, adding, “but that is no longer possible because my father, who was paying my school fees, died six years ago after a brief illness.” Worse still, his mother, a petty trader at the popular Ketu Fruits Market, cannot sustain him and his three other siblings from the little proceeds she makes from her trading business, necessitating their dropping out of school prematurely.

Pathetic as Anthony’s case appears, that of Abiodun, who lives at Isheri- Olofin, a border town between Lagos and Ogun states, is more saddening. Abiodun, a casual worker at West African Rubber Product Company (WARP), owned by Lee Group of companies in Ikorodu, had his right hand chopped off by a machine in April 2012, while on duty.

He waited four years for justice. While the waiting lasted, his children’s education came to a halt because he could not earn a living. Although in August 2017, the company gave him a paltry N100, 000 as compensation on ‘compassionate grounds’. But, respite is yet to come for his children as Abiodun used the money paid to him to settle part of his accumulated debt.

However, these unforeseen happenings often bring to question how parents plan for the future of their children. Though insurance experts believe that one of the ways to secure a child’s future is to cover the educational expenses after a death or disability, the average family in the country may not have the funds for such expenses.

Yet, the professionals insist, life insurance or bank savings for the children’s education is the only way out. For insurance companies and banks, there is a need for adequate preparation by parents to secure the future of their children’s education.

But, many parents seem not to be aware that there are products and services that some insurance and banks offer to take care of their children’s education when the unexpected occurs. Even when they are aware, low income proves a major hindrance to taking up such policies.

Most parents complain that their income is not enough for them to patronise such policies. Aside from the low income problem, Saturday Telegraph’s findings reveal that some parents are skeptical about the policies because of what they observe as “the cumbersome nature of the policies.” The fear being expressed by these parents may not be out of place.

Many believe that most of the conditions attached to insurance policies are two tedious to understand. Moreover, there are those who also believe that some aspects of the agreement are not disclosed at the time a prospective client is taking the policy, until much later when probably it is time to hatch the plan. Also, many of these products and services, they allege, lack distinction in terms of added value, depth and creativity.

To them, they simply offer the same service and this, according to this school of thought, leaves a customer no choice. Unlike in foreign countries, where incentives are attractive and enticing, the Nigerian products, they insist, attract an unimaginably low interest rate.

Former Secretary to the Ojodu Local Council Development Area, Mallam Ahmed Jaji, for instance, told Saturday Telegraph he is not so keen on operating any of the policies “because of some hidden conditions, which the operators will not disclose to you.”

But, Comrade Sampson Kayode Idowu, former chairman, Nigerian Union of Teachers (NUT) Lagos State wing, disagrees. He said while it is true that some parents are skeptical about going to insurance companies because of the bitter experiences they had gone through in the past that cannot be enough to make them shy away from the policy and the inherent benefits. “It’s a worthwhile policy, if you ask me.

The problem is that people only look at the negative side in the case of payment at maturity. What I would suggest is for the insurance companies to embark on more enlightenment campaigns for people to understand the plan fully. That would help them make an informed decision on this product,” he advised.

A parent, who lives at Agege, a suburb of Lagos, but does not want his name in print, insisted Jaji, was right on point. “You are invited to take a policy, you take it, pay your premium to a certain level, but when it is time for them to fulfill their own part of the agreement, it will be the time they will bring in a lot of bottlenecks,” he said. Yet, a Lagos-based lawyer, Emmanuel Nwaghodoh, differs when he stated: “You are given a policy to read, if you discover that such policy is not in tandem with what you want, you are free to return such policy. You are allowed to determine what amount you want to deposit to start the policy.

It is not like the banks where you are asked to deposit a minimum amount; you determine what you want and the duration you want the policy to last.” Apart from the cumbersome nature of the policies, lack of information is also posing some problems. Some parents said they are not even aware that such policies exist. Mrs. Abike Balogun, a retired nurse, said: “The insurance companies should intensify campaigns through advertisement for them to bring the message to the parents, who are yet to know about these services.” Idowu concurred with the observation. He said the insurance companies have not lived up to expectation in this direction.

“You do not know that there is a good product until people know about it. So, the insurance companies should properly market the product,” he said. To Idowu, the products and services of the insurance companies and banks on education are very necessary. “Parents alone cannot single-handedly fund the education of their children.”

Yet, he wonders how such policies can work in an unstable economy. “How are you sure that the job that you have now that in two months or two years’ time you will still have it? “Or if you are working for somebody now and your salary is not regular, you get your salary now, before you get the next one, it will take more than three months.

It will be very difficult to contemplate making such a move, that is another issue we should also look at here,” he stated. But, while some parents bemoan their experiences with some insurance companies, others claim that they have actually been bailed out by these policies in their hour of need.

A senior citizen, Oyibundu Chimanugor, said it would actu-ally be difficult for one who has no regular income to embark on insurance policy. However, he would not forget easily how such a policy he took some years back helped him to complete the education of his children in the university when he retired.

This may be why he maintains that the package being offered by the insurance companies on education is more beneficial than the ones offered by the banks. His reason is that the money being deposited in the banks for such purpose can easily be channelled into other uses. Another parent, who craved anonymity, attested to the benefits of saving with insurance companies.

“When the school my children attend introduced the scheme along with the school fee, I was thinking the policy will not work, until my bosom friend died, and one of his children was paid N100, 000 cash benefit, even when that offer was exhausted, the insurance company gave another of his child a full scholarship,” he said. That was an eye-opener for him. But, as it appears, the burden of paying school fees along with the insur-ance policy may become increasingly unbearable to some parents.

Why? The anonymous parent claimed his children’s school increases their fees every year in the name of insurance policy without considering the purse of the parents. He said: “Some schools where the scheme now operates increase their fees astronomically every year without considering the implication it will have on the parents.” And the insurance experts are worried. For instance, a former Group Lead, Retail/Micro Insurance/ Bancassurance at Guinea Insurance Plc., who does not want to be mentioned, said he is worried because parents are not availing themselves of the opportunity being provided by the insurance companies to take care of their children in the event of death or permanent disability.

Advertising his former company’s product, he said, Guinea offers children education insurance policy that guarantees the schooling of the child to university level if the parent does not live long enough to shoulder the responsibility. He also said his former company offers a group scheme to ensure that the education of a child is not disrupted either at nursery, primary or secondary level.

This, according to him, gives all students in a particular class the opportunity to come together and make a group contribution where an individual finds it difficult to pay a personal premium. He did not stop there. He noted that the policy could be introduced along with school fees, which will be so small that parents would not feel it. But, the benefit, he said, is much.

He explained: “Schools could jointly take a policy for their students whereby each parent would be required to pay a paltry sum of N500 for a year to cover their children’s insurance policy. This, in turn, could yield for the beneficiaries up to N100, 000 cash benefit as well as full scholarship should the unexpected happens.” He went further to state that even the premium a parent has already paid will be refunded to him, according to the scheme indicated in the plan, if the child dies before the maturity of the plan.

The only exception, he said, would be if the parent decides that such benefit is transferred to another child of his. But, when such a parent dies before the maturity of the plan, all the future premiums will be waived and the company will continue the premium payment on his behalf.

As this is going on, “Monthly revenue of a certain percentage of the agreed capital will be paid to the affected family till the maturity of the plan,” he stated. The maturity of the plan normally takes about seven to 20 years depending on the agreement between the two parties.

But, fear is being expressed that paying the monthly revenue to the family may not guarantee financing of the child’s education, especially in a society like Nigeria where the bereaved are often abandoned shortly after the death of their loved ones. For AIICO Insurance Plc., every parent’s joy is to ensure that their children get quality education and turn out great in future. This could be why the company offers two education policies to meet these needs: Children Education Plan (CEP) and Education Legacy Assurance Plan (ELAP). CEP, according to the company, is an education endowment plan that ensures the continuity of the education of a named child (beneficiary) in the event of death or permanent disability of the policyholder up to the maturity date.

Its features include but not limited to future premiums’ waiver at death or disablement of the policyholder, an annual income of 12 per cent of the sum assured to be paid to assist in the education of the named child to maturity date of policy, returns of premiums paid in the event of death of the named child and payment of lump sum at maturity to the named child. AIICO’s former Group Managing Director, David Sobanjo, said while the insurance policy is structured to protect a child from being forced to end school prematurely, it can also be used as a savings plan to accumulate sufficient funds for one’s children’s education. Speaking on the benefits of the policy, he said it guarantees a life assurance benefit of a guaranteed sum assured to a maximum of N10 million or the balance in the policyholder’s account, whichever is higher.

He also confirmed that there is an annual maintenance income of 25 per cent of the sum assured that will be payable for five years in the event of the demise of the policyholder. Sobanjo added that a disability benefit will be made available in the event of total or permanent disability of the breadwinner. This means that the policyholder enjoys benefits due under the life assurance cover, as well as the annual maintenance income. Additionally, the policy provides a redundancy benefit due to loss of employment, thus, allowing the policy holder to enjoy a waiver of the premium for six months. It also allows a cash withdrawal option of up to 20 per cent from the legacy account to assist in the child’s education provided the policy has been in place for a minimum of five years.

The former MD further explained that there is also the AIICO Group Education Policy with extended benefits. “The policy will pay for the education of the child named in the policy, on the death of the sponsor parent/ guardian of the child,” Sobanjo said. Where the named child repeats a class for a maximum of two times, he explained, the policy will pay the school fees until such a child leaves school, consequent upon the death or permanent disability of the breadwinner.

He added that school fees shall be disbursed to the school upon death or permanent disability of the sponsor of the child per term, until the child graduates from nursery/ primary or secondary school as the case may be. “The essence of this insurance scheme is to ensure that the education of a child is not disrupted either at nursery/primary or secondary level, should the sponsor die or suffer permanent disability,” Sobanjo said. Industrial and General Insurance (IGI) in its own claims, said its continuous Education Endowment Scheme (EES) has assisted a number of children whose parents died or are incapacitated. A senior employee, who spoke on condition of anonymity because “I’m not authorised to speak to the press”, said the company undertakes this to ensure quality education for children.

“We are concerned about children’s education; that is why we go a bit further to assist parents to obtain loans on the policy,” he disclosed. However, the quest to bequeath lasting legacy to Nigerian children is not limited to the insurance companies alone. It is also a new vista to some banks. For instance, First Bank Plc., has, for some years now, been running an education scheme known as Children’s Education Trust (CET). The scheme carries a maturity period of five years within which a parent would have saved enough money to cater for the educational expenses of his child. Though maturity is tied to the fulfillment of the object of the Trust or as may be otherwise directed by the beneficiary.

The Fund shall be locked up for an initial minimum period of two years before withdrawals can be made. And withdrawal from the Trust Fund is limited only to educational expenses for the beneficiaries upon presentation and confirmation of invoice from the child’s school. Third parties are precluded from having access to the Trust Fund, although they are allowed to make contributions. One of the attractions is that convenient and flexible school fees can be paid directly from the Trust Fund as captured in the Trust Declaration. It also ensures commitment to investment plan to the continuation of the child’s education even after the parent’s demise subject to funds in the Trust account.

It gives parents the opportunity to choose the desired school for their kids upfront. Other banks also parade bountiful products and services. Some targets infants, pre-nursery, nursery or primary pupils, secondary and postsecondary students. Most of them, however, require a parent to deposit a minimum amount. The accounts also attract some percentage interest rates for holders that maintain a specific minimum daily balance.

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