Microinsurance

What is Microinsurance?

Microinsurance products offer coverage to low-income households or to individuals who have little savings. It is tailored specifically for lower valued assets and compensation for illness, injury, or death.

How Microinsurance Works

As a division of microfinance, microinsurance looks to aid low-income families by offering insurance plans tailored to their needs. Microinsurance is often found in developing countries, where the current insurance markets are inefficient or non-existent. Because the coverage value is lower than the usual insurance plan, the insured people pay considerably smaller premiums.

Microinsurance, like regular insurance, is available for a wide variety of risks. These include both health risks and property risks. Some of these risks include crop insurance, livestock/cattle insurance, insurance for theft or fire health insurance, term life insurance, death insurance, disability insurance, and insurance for natural disasters, etc.

Getting microinsurance out to those in need can be challenging so there are a few different models for delivering it to a client base.

Like traditional insurance, microinsurance functions based on the concept of risk pooling, regardless of its small unit size and its activities at the level of single communities. Microinsurance combines multiple small units into larger structures, creating networks of risk pools that enhance both insurance functions and support structures.

Microinsurance Delivery Methods

Delivery of microinsurance is a challenge. Several methods and models exist, which can differ according to the organization, institution, and provider involved. In general, there are four main methods for delivering microinsurance to a client base: the partner-agent model, the provider-driven model, the full-service model, and the community-based model: