The most common type of microinsurance, historically and in the present, is life insurance. While it is widely viewed as the simplest type of microinsurance, life coverage is in some ways quite complex and varied.
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), a popular formula among 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 the payment of funeral services 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 if they are alive at the time the contract ends. This is atypical of most microinsurance policies.
The benefits of life microinsurance also vary, and often combine two or more of the following:
- Cash payout to the beneficiary
- In-kind funeral services coverage of funeral costs
- Cancellation of the outstanding loan balance of the insured (credit life)
- Combined savings/pension product
Contracts covering the death risk can also provide for supplemental guarantees concerning the policyholders’ invalidity
- Emily Zimmerman, Barbara Magnoni & Michael J. McCord (2013). Beyond the actuary's guess - lessons from 15 studies on client value of microinsurance. Appleton: MicroInsurance Centre.
- Jonathan Bauchet, Emily Zimmerman, Barbara Magnoni & Derek Poulton (2012). Condensed MILK - Protecting those Left Behind: An Experimental Study of Life Microinsurance Purchase Decisions of Compartamos Banco's Clients in Mexico. Appleton: MicroInsurance Centre.