What is Industrial Life Insurance? ( Purpose and Characteristics)
Industrial life insurance is pre-arranged for small income earners (savers), specifically for those prospective policyholders who are financially unable to pay the havier premiums for ordinary life assurance.
life insurance which is written upon individual lives in small amounts and for which the premiums are collected weekly or monthly by agents can be referred to as industrial life insurance. However, Industrial life insurance is the kind of life insurance that is usually sold to industrial workers, and which carries a face value attribute that is considerably lesser than other types of life insurance. Just as its name implies, it was designed for low-income workers in the industry.
Unlike ordinary life assurance, the exact sum assured in industrial life assurance is determined only after knowing the amount premium the policyholders can afford to pay.
The maximum sum assured is a small amount usually fixed statutorily. Insurance Decree of 1976 Sec. 62 p. A289, define industrial life policy as an arrangement whereby the insurer assumes a contingent obligation depending on human life, in an amount not exceeding the sum of N2,000 in return for a premium or the promise of a premium payable at intervals not exceeding two months if the insurer has expressly or tacitly undertaken to send a person from to time to the policyholder or to his residence or place of work to collect the premium.
Note: Industrial life insurance premiums are paid on either a weekly or a monthly basis. However, the face values of industrial life insurance policies are no more than N10,000. This is considerably lower than other types of life insurance policies, which typically have face values of hundreds of thousands. Industrial life insurance is a good option for people who want some life insurance but cannot afford to pay high premiums.
At the early stage of industrial life policy, weekly or fortnightly time intervals for the premium collection were the feature.
The periods coincide with those of wage payments in those days. Going to policyholders to collect premiums reflects the feeling that they may not be disciplined enough to go to the insurance company to settle their obligations regularly, if at all they go. Among the popular contracts are endowment and whole life assurances.
Actually, industrial life insurance is said another form of ordinary life assurance only tailored to suit a particular market.
Characteristics of Industrial Life Insurance
a. Premium disbursement are made regularly
b. The program covers everyone in your family, from birth to age 70
c. Industrial life insurance is designed for small income savers
d. The maximum sum assured is a small amount usually fixed statutorily.
e. The benefits are usually less than N2,000
f. Industrial life policies are usually sold in small amounts and the premiums are collected weekly or monthly by a debit agent at the policyholder’s home.
Ordinary life assurance is gradually dominating industrial life because of the following reason
i. Manpower: The number of policies of industrial life assurance is bound to be significantly much- larger than the number of ordinary life policies
ii. Size of premium: Where ordinary life contracts allow for shorter and shorter periods of payment, the size of premium payable also become smaller and smaller. in this case, ordinary life insurance appears as convenient as industrial life business in premium payable.
iii. Inflationary trend: As the economy becomes more and more inflationary the fixed amount of industrial sum assured diminishes more and more in value. In this case, industrial life assurance offers no further attraction.
iv. Affluence: The more affluent the masses are in an economy the more capable they are of effect ordinary life policy by offering greater rewards.
The key facts about Industrial Life policies and individual life insurance policies
Many of the attributes that are found in individual life insurance policies are also found in individuals’ life in ILI
i. A 31-day grace period for monthly premium policies, and 28 days for weekly premium policies.
ii. The application is not required to be administered in accordance with the policy.
iii. You don’t have to have a medical examination.
iv. Cash value does not increase enough to provide loans.
v. There are no settlement options
vi. Nonforfeiture provisions prevent you from cashing in your life insurance policy until premiums have been paid for five years.
vii Dividends are used to reduce the premium payment or to purchase more insurance.