A microinsurance scheme is a scheme that uses, among others, an insurance mechanism whose beneficiaries are (at least in part) people excluded from formal social protection schemes, in particular informal economy workers and their families. The scheme differs from others created to provide legal social protection to formal economy workers. Membership is not compulsory (but can be automatic), and members pay, at least in part, the necessary contributions in order to cover benefits.
The expression "microinsurance scheme" designates either the institution that provides insurance (e.g., a health mutual benefit association) or the set of institutions (in the case of linkages) that provide insurance or the insurance service itself provided by an institution that also handles other activities (e.g., a micro-finance institution).
The use of the mechanism of insurance implies:
* Prepayment and resource-pooling: the regular prepayment of contributions (before the insured risks occur) that are pooled together.
* Risk-sharing: the pooled contributions are used to pay a financial compensation tothose who are affected by predetermined risks, and those who are not exposed to theserisks do not get their contributions back.
* Guarantee of coverage: a financial compensation for a number of risks, in line with a pre-defined benefits package.
Microinsurance schemes may cover various risks (health, life, etc.); the most frequent microinsurance products are:
* Life microinsurance (and retirement savings plans)
* Health microinsurance (hospitalisation, primary health care, maternity, etc.)
* Disability microinsurance
* Property microinsurance – assets, livestock, housing
* Crop microinsurance
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