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  A contract refers to any agreement between two or more parties in which there is a promise by one party to the other(s) to be met under agreed conditions. Generally, contracts are entered into by writing after discussions on them by the parties involved. However, contracts could also be entered into simply by oral agreements.
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There are cases where the validity of a contract must be verified with the presence of a written document. An insurance contract is one of such. Aside from documentation of contract terms, there are other conditions required for an insurance contract to be valid in Nigeria.

What Is An Insurance Contract?

An insurance contract refers to a legal agreement between two parties in which one party known as the insurer accepts to pay an agreed amount in compensation to the second party (insured) in the event of the occurrence of a loss.

Conditions For An Insurance Contract To Be Valid

For an insurance contract to be considered valid under Nigerian laws, four conditions must be seen to have been duly met. These conditions are:

Legal Capacity To Enter Into Contract

In Nigeria, anyone seeking to enter into a formal contract must have the legal capacity to do so. An individual considered a minor (below 18 years) cannot enter into an insurance contract. The Minor’s interest must be represented by a guardian, legally empowered to represent his or her interests. Also, in the case of a company seeking out a contract, there must be evidence that such a company has been empowered by law to enter into a contract within the country.

Evidence Of Insurable Interest

For an insurance contract to be entered into, there must be seen to be evidence of ‘insurable interest’. What this means is that an individual seeking to take out an insurance cover for a particular risk must be legally connected to such, in a way that he or she stands a personal loss in the event of the occurrence of such. You cannot insure a car or property that is not legally owned by you.
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Written Agreement

An insurance contract is one of the many contracts required by law to be duly documented, with all terms and conditions of the contract spelt out and agreed to by the two parties involved – the insured and the insurer. This is very important to remove all ambiguities and complications.

Evidence Of Payment

This is probably the single most important condition to be met in an insurance contract. For an insurance contract to be enforceable under the laws of Nigeria, there must be evidence of payment of an agreed amount by the insured to the insurer. In fact, according to section 50(1) of the Nigerian Insurance Law, 2003, this payment must be seen to have been made in advance of any loss to be claimed.
“The receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk, unless the premium paid in advance.”
A popular execution of this law in Nigeria was in the case of the Industrial and General Insurance Company Limited v. Kechinyere Adogu (Mrs.) (2009). Mrs Adogu insured her Mercedes Benz car was on December 18, 2002, for a term of 12 months at an agreed premium of NGN 520,000.00. She immediately made the initial deposit of NGN 220,000.00. Unfortunately, she was robbed of the car on February 15, 2003, at which time she was yet to pay the agreed premium. Two days after the robbery, she approaches the insurance company to pay NGN 300,000.00, to complete the payment of the premium. In its ruling, the Court of Appeal ruled that there was no valid contract of insurance between the parties as the payment of the agreed premium was not effected before the loss occurred.


Insurance is a form of investment that seeks to protect you from risks and other life’s uncertainties. When you enter into any form of an insurance contract, ensure you understand the terms specified in the contract and do well to abide by the conditions especially the condition of the payment of your premium in advance. I strongly recommend you engage the services of a qualified legal or financial adviser before entering into an insurance contract. Featured Image Source: iEduNote
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This article was first published on 22nd January 2022


Ifegwu-Mbonu Victor is a Personal Growth and Leadership Trainer who provides training and coaching to individuals and organizations.

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