What is Auto Insurance?
Auto insurance is an agreement between a policyholder (the person who buys the insurance) and an insurer (insurance company).
Under this agreement, the insurance company covers the cost of repairs if the car is damaged in an accident or replaces the car if it’s stolen or totaled.
If the policyholder causes damage to another vehicle or injures someone, the insurance company also helps cover those costs.
In simple terms, auto insurance is the financial protection that helps you manage the unexpected expenses that come with owning and driving a car.
Types of Auto Insurance in Nigeria
In Nigeria, auto insurance is a necessary requirement for all vehicle owners. It not only ensures compliance with the law but also provides financial protection in case of unexpected events.
Below are the three main types of auto insurance in Nigeria:
1. Third-Party Auto Insurance
Third-party car insurance is the most basic type of coverage required by the Nigerian government for all car owners. It protects you by covering the costs of any damages or losses you may cause to another person’s vehicle or property in an accident.
What it Covers: Bodily injury or death of a third party and damage to a third party’s property, including their car, fence, etc.
What It Doesn't Cover: Third-party insurance policy doesn't provide coverage for any damage to your own car or any injury you may sustain from the accident. All financial losses related to you would have to be covered by you.
How Much Is Third-Party Car Insurance in Nigeria?
According to the National Insurance Commission (NAICOM), the new price for third-party insurance is 15,000 naira per year and no longer 5,000 naira.
NAICOM made this increase due to rising inflation and to raise the coverage for third-party property damage to 3,000,000 naira. This ensures that higher repair or replacement costs are adequately covered.
However, this type of insurance does not protect your own vehicle. If your car is damaged in a collision with a third party, you’ll have to handle the repair or replacement costs yourself.
2. Comprehensive Auto Insurance in Nigeria
Comprehensive auto insurance, commonly referred to as full coverage, safeguards your vehicle against non-collision-related damage. It covers loss or damage resulting from unexpected events.
This type of insurance can also help cover costs if your vehicle causes injury or death to others or damages their vehicles or property. If you own a new car, getting this coverage is important.
What it Covers: Comprehensive car insurance protects against damage caused by theft, fire, and natural disasters like floods, earthquakes, or falling trees.
What It Doesn't Cover: It doesn’t cover damages caused while driving under the influence, wear and tear, or mechanical breakdowns.
How Much Is Comprehensive Car Insurance in Nigeria?
Currently, the price of comprehensive car insurance in Nigeria is 5% of your car’s value each year. This means that if your car is worth 5 million naira, you might be paying ₦250,000 annually.
3. Third-Party, Fire & Theft Insurance
Third-party, fire, and theft insurance is a balanced option that provides more protection than a basic third-party policy.
It includes all the benefits of third-party coverage and protects your car against major risks like fire damage or theft.
What It Covers: It includes everything in the Third-Party policy and covers your own vehicle against loss or damage from fire and theft.
What It Doesn’t Cover: Third-party, fire, and theft insurance does not cover damage to your own car if the damage is caused by an accident, especially a collision.
The Importance of Auto Insurance in Nigeria
If you're buying a used car in Nigeria, getting auto insurance isn’t just about following the law. It’s about staying protected on the road.
Here are some reasons why having car insurance in Nigeria matters:
Makes Vehicle Financing Easier
If you’re purchasing a car with a loan, most banks or financing companies will ask you to have at least a basic insurance policy. This is because the car is still theirs until you’ve fully paid it off.
Auto insurance safeguards their investment against potential damage, theft, or total loss in an accident.
Furthermore, it protects you from having to cover the full cost of repairs or replacement while still making loan payments.
Legal Requirement
Driving in Nigeria without valid auto insurance is against the law. As a car owner, you need to have a recognized insurance policy, especially the third-party insurance to avoid issues with law enforcement. Getting caught without one could result in a fine of about 250,000 naira or even jail time.
Reduces Personal Liability
Accidents occur unexpectedly, and without coverage, you’d have to pay for everything on your own, including car repairs, medical bills, or even damages to someone else’s vehicle or property..
What Are the Requirements to Get a Car Insurance Certificate?
To get a car insurance certificate in Nigeria, there are a few key requirements you need to meet. These details help the insurance company verify your identity, your vehicle, and its ownership before issuing your policy.
Some of the requirements include:
Proof of Ownership
Before you can insure your car, you need to prove that you own it. This is typically done by providing your vehicle registration documents.
These documents confirm that your car is legally yours and registered with the appropriate authorities.
Valid Driver's License
Having a valid driver's license is important. It shows that you're legally allowed to drive and also helps the insurance company assess your driving history. Some insurers may even check your driving record to determine your premium rates.
Vehicle Documents
These include your car’s registration papers, roadworthiness certificate, and sometimes previous insurance documents. They help confirm your car is safe and roadworthy.
Premium Payment
Insurance isn't free, but the cost is relatively affordable. For instance, the minimum required insurance, known as Third-Party Only insurance, costs around ₦15,000 per year for private cars.
You can pay your premium online using a debit card or bank transfer. Once your payment is confirmed, you'll receive your insurance certificate, often instantly via email.
Factors Affecting The Cost of Car Insurance in Nigeria
The cost of car insurance in Nigeria isn’t the same for everyone. Several factors determine how much you’ll pay for coverage. So, understanding these can help you make smarter choices and even save some money.
Here are the main factors that affect the cost of auto insurance in Nigeria:
Type of Coverage
The level of coverage you choose affects your premium. Generally, comprehensive insurance is pricier than third-party-only insurance, which covers only damages you cause to others.
Vehicle Make, Model, and Value
The make and model of your car, along with its value, can affect your insurance cost. For example, if you're driving a luxury brand or an imported vehicle, the premiums are usually higher. This variation is due to increased repair costs and a higher risk of theft.
Age and Driving Experience
Younger and less experienced drivers are usually required to pay higher premiums. This is because insurance companies consider them higher risk due to statistically higher accident rates among these group of car owners.
Driving Record
A clean driving record with no accidents or traffic violations can lead to lower premiums. However, a history of claims or infractions may increase your insurance costs.
Location
Where you live and drive matters. If you live in areas with higher traffic density and crime rates, your premium rates will be higher.
Vehicle Usage
Cars used for commercial purposes or ride-sharing services typically attract higher premiums than those used solely for personal purposes.
Security Features
Vehicles equipped with anti-theft devices and other security features may qualify for discounts, as they reduce the risk of theft and damage.
Conclusion on Auto Insurance in Nigeria
Auto insurance in Nigeria is an important aspect of responsible vehicle ownership. It provides financial protection against unforeseen events and ensures compliance with Nigerian road laws.
By understanding the factors that influence insurance costs, you can make informed choices.
Before choosing an insurer, it's best you compare quotes from different insurers, consider your specific needs, and choose a policy that offers the best value for your circumstances.