Life Insurance

The flagship product of microinsurance nowadays remains life insurance.  It can combine life insurance coverage (when the policyholder is alive) and a savings product, which makes it a particularly well adapted service in the context of microfinance.  Many MFIs have also set up highly simplified life insurance products (in case of death) that cover the payback of a loan in progress in case the borrower dies. 

There are two categories of products within life insurance:

• Among insurance in case of death, there are “temporary” and “lifelong” insurance policies:
  • Temporary policies guarantee a capital (or an annuity, on an exceptional basis) in case the policyholder dies before the end of the contract.  This type of policy can be subscribed for as part of a loan coverage product (borrower’s insurance). This is the favourite formula for many microfinance institutions. 
  • As for lifelong contracts, those guarantee a capital (possibly an annuity) in case of death at any time.  The only undetermined element for the insurer and policyholder is the day and time of death.  Guarantees covering funeral charges are often included in this type of contract.
• Among insurance policies when the policyholder is alive, and in the case of microinsurance, deferred capital is the main element. 
  • Deferred-capital contracts provide for the payment of the guaranteed capital to the policyholder when he/she is alive at the time the contract ends. 

Contracts covering the death risk can also provide for supplemental guarantees concerning the policyholders’ invalidity risk.  This happens quite frequently in the case of a borrower’s insurance.

Source: Text based on Dossier thématique Micro-assurance ©2007, www.lamicrofinance.org