Choosing Your Life Insurance Beneficiary Correctly

Life experiences are true stories. When something is true, explaining it becomes quite easy as you don’t have to conjure up anything. You just say it as it is.

As I thought about what to write today, a true life story from my journey in the life insurance business flashed through my mind. It has to do with the way Nigerians (or, is it actually Africans?) think when it comes to choosing their beneficiaries for life insurance policies.

Some years back, we asked members of a particular staff retirement and death-in-service scheme to complete nomination forms. That was well before the enactment of the Pension Reform Act 2004 in Nigeria. The employees of that oil company were about 3,000 in number. About 70% (2,100) were males while the remaining 30% (about 900) were females.

In those days, it was quite customary to have a board of trustees for the management of the pension/group life insurance scheme. The board would typically comprise of representatives of the management, senior, and junior officers of the organization.  It was also common for the life insurance company to carry out many duties under an insured scheme on behalf of the trustees. One of such duties for the scheme I’m talking about was the design and co-ordination of nomination forms for the employees’ completion. Each staff was expected to give the name (or names) of the beneficiary of his pension/life insurance benefits in the event of his (the employee’s) death in service. General staff meetings were also arranged to enable us, in conjunction with the board of trustees, educate the staff on their rights, benefits, and obligations under the scheme.

We noticed that almost all the married women among them chose their husbands as their named beneficiaries. Conversely, less than 5% of the married men among the group chose their wives as their named beneficiaries! This came as a surprise to us and, in an attempt to find out what could have influenced this great disparity in choice, we posed a question to them at one of the meetings: “Who would you rather choose as your beneficiary under your staff retirement and death-in-service scheme?” Hell was let loose as arguments upon arguments ensued, most especially between the few women in the hall and the majority of the married men who were present. The results we had earlier seen on their nomination forms were duly replayed in the hall that day.

The women, all of them, felt that a man is the head of the family so he should be accorded that respect. According to them, their children belonged to their husbands hence those husbands should be entitled to the scheme benefits and utilize them judiciously for the upkeep of their children. How considerate the women were, we thought. In fact, this immediately touched the emotional part of my team at that meeting and we all came to believe that Nigerian women were much more loving and caring than their male counterpart.

Well, I’m sure you will want to know the reactions of those men to that question. Of course, they were brutal in their submissions. Most of them had named their brothers, sisters, uncles, even mothers or fathers as their beneficiaries. And they were proud to defend their decisions openly as the debate raged on that afternoon.  Many of them swore that they would never choose their wives as beneficiaries because, as they put it, a woman would always find another husband for herself and if the scheme money should be paid to her, she and the new husband would enjoy the money.

One of the men was so adamant that a wife would forget all about her children the moment she sees money! Another man opined that as far as his own culture was concerned, his wife would form part of the inheritance so it was of no use naming her as the beneficiary; because she herself would be shared by his family as part of the “assets” left behind.  Others thought that naming their wives as the scheme beneficiaries was a clear invitation to premature death. They believed that their wives could kill them because of the insurance money! If you read Life Insurance Dialogue, you would find a similar assertion made by one of the speakers.

As hard as the male employees of that oil company tried to justify their position, I still very much believe that a man’s wife or children best qualify as named beneficiaries under a pension scheme or life insurance contract. I have seen a lot of instances where a wife and children became instant destitute the moment the husband died. I have seen how merciless the extended family members, most especially the Olori Ebi (Family Leader), became at the death of one man.

When a man dies and leaves some inheritance like houses, cars, money etc, it is not uncommon for those family members to surface from nowhere and start making life difficult for the wife and children – most especially if those children are still very young.

Let’s even assume that a woman is being considered as part of an inheritance, she can resist such attempt if she has money in her pocket. I am aware that the practice of inheriting wives is not as common as it was in those dark days of old. But they are still practiced in some rural areas of Nigeria till today. Even for those in the cities, the wife could be “inherited” clandestinely if she is poor and does not have a choice. While she may not be outrightly pronounced as having become the wife of a brother or uncle of her deceased husband, her pathetic circumstances may lead to it. In such a case, inheritance could come from that brother or uncle as a form of “assistance,” and she, of course, ends up in the man’s bedroom.

Between the years 2002/04, I was involved in various discussions leading to the enactment of the Pension Reform Act 2004. That time, my boss was appointed as one of the committee members set up by the Federal Government to come up with a draft law for the new pension scheme for the country. There were many committees at that time but his was the one coordinated by the Office of Head of Civil Service of the Federation (OHCSF). I was part of a team that had earlier visited Chile in 2001 to understudy their pension scheme and somehow, I got co-opted into that OHCSF committee along the way and attended almost all their meetings.

I attended each meeting with my boss, and represented him whenever he was unable to attend any of the meetings in Abuja.  What baffled me was the extent of arguments that the issue of beneficiary generated as we debated the new draft law. Questions upon questions were brought forward: “What happens if someone has more than one wife?” “Should the benefits be shared equally among beneficiaries?” “What if the wife leaves her husband, but the man forgets to change the name on his form thereafter?” “What if the family does not recognize the woman?”

Well, the rest, as they say, is now history. Section 5(1&2) of the Pension Reform Act 2004 that came out thereafter appears to have duly recognized the peculiar nature of our people. The section says, (1) where an employee dies, his entitlements under the life insurance policy maintained under subsection (3) of section 9 of this Act shall be paid to his retirement savings account. (2) The pension fund administrator shall apply the amount paid under subsection (1) of this section in accordance with section 4 of this Act in favour of the beneficiary under a will or the spouse and children of the deceased or in the absence of a wife and child, to the recorded next-of-kin or any person designated by him during his life time or in the absence of such designation, to any person appointed by the Probate Registry as the administrator of the estate of the deceased. Underline is mine.

That is for the country’s compulsory pension scheme. Similar recommendation could be given to people who are taking up individual life insurance policies. For anyone who does not want to leave his wife and children in the cold after his death, the best thing is to name either the wife or the children as the beneficiary (ies) under a life insurance policy. As the proceeds of a life insurance policy can also form part of the assets to be divided under a will, it is very important for a policyholder to specify who the beneficiary of the policy is. Where this is so, it will no longer be a subject of a will since the beneficiary has already been clearly stated.

Section 57(1) of the Nigeria Insurance Act 2003 has also made things simpler by stating that, “A policy of insurance shall not be made on the life of a person or other event without inserting in the policy the name of the person interested in it, or for those whose benefit or on whose account the policy is made.” It therefore behooves on the policyholder to make this clear from the outset.

It should also be noted that the existence of the life insurance policy could only be known to the wife and the husband. So in the event of death of the husband, it is unlikely that any (extended) family member would be aware of the insurance money (which could be quite huge). Let them fight over the house(s). Let them kill one another because of the cars; at least, the wife will have the insurance money to herself and her children.

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