Microinsurance is a mechanism to protect poor people against risk (e.g. accident [1], illness [1], death in the family [2], and natural disasters [3]) in exchange for payments tailored to their needs, income, and level of risk.
It is aimed primarily at the developing world´s low-income workers, especially those in the informal economy who tend to be underserved by mainstream commercial and social insurance schemes.
Microinsurance allows policyholders to recover and rebuild after a crisis. It can mean avoiding difficult, often devastating risk coping measures such as putting children to work, eating less food, or selling productive assets. It promotes resilience and contributes to the Millennium Development Goals, including reducing hunger and child mortality, and improving maternal health.
In the event of shock, the benefits of microinsurance go beyond financial help as it can:
Reduce risk: Insurance can play a critical role in reducing risk, since insurers have an incentive to prevent risks from occurring;
Stimulate productivity and asset accumulation: The working poor invest more in their livelihoods, and get higher returns, if they are protected by insurance. They can also build savings through a long-term life insurance policy;
Deliver tangible benefits: Insurance with tangible benefits, such as a hot line for medical advice or health camps that provide vaccinations and mosquito nets, can make a huge difference in the lives of millions
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