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Insurance
January 10, 2025
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Have you ever wondered what would happen if you were no longer around or able to support your family? Who would take care of them? It’s a tough question. One we would all rather avoid. However, this is an important reality we must face. Life insurance could be the answer to this unsettling question.
Life insurance is a contract between an insurer and the policyholder, where the insurance company commits to paying a certain amount of money in case of an eventuality. In exchange, the policyholder pays premiums for a specified period of time.
The main goal of life insurance is to offer your loved ones the financial protection they need in case of an untimely death or permanent disability. It ensures your family is able to cater to their needs and achieve important goals such as education or home ownership. You could also use life insurance as a means of preserving wealth or creating an inheritance for your loved ones.
This is a life insurance policy that combines both protection and investment. In the event of untimely death of the policy holder, the insurer pays the full sum assured to the beneficiaries. If the policy holder survives till maturity, the insurer pays the guaranteed maturity benefits plus any earned bonuses. Education policies fall under this category.
As the name suggests, whole life insurance is a permanent policy that only pays benefits upon the death of the insured. The policy does not have a stipulated timeline; it covers the insured's entire life. Premiums are paid either as a single payment until the age of 60 or an agreed-upon age.
This is one of the simplest and cheapest types of life insurance. It only offers protection without any investment benefits covering the insured for a limited period. Under this cover, the insurance company pays the full sum assured if the policy holder dies within the period they are insured. If the policy holder survives till the policy matures, no benefits are paid out.
This policy allocates a portion of the premiums paid to life insurance while the remainder is used to purchase units of an investment fund managed by the insurance company. The benefits of the policy depend on the performance of the investment fund.
The right life insurance coverage provides valuable benefits, offering peace of mind and essential financial protection. Here are some of the benefits of getting a life insurance cover;
If you have a family or people who depend on you, life insurance gives your dependents a financial safety net. In case of death, your beneficiaries receive a lump-sum payment, allowing them to maintain their lifestyle and pay their bills.
Read Also: Would You Take an Insurance Cover That Pays You When You Lose Your Job?
Unit-linked insurance plans and endowment policies allow you to save and invest while still offering the financial protection you need. These plans require a disciplined savings routine (premium payments) and offer a return on your investment.
Margaret Njeri, a financial advisor based in Nairobi, provided valuable insights into various investment plans. She explains that individuals aged 25-27 years can access a 10 year investment plan that offers a maturity estimate of Ksh1,725,067, with a monthly premium of Ksh10,025.“For young professionals aiming to establish a solid financial foundation, this plan provides an excellent balance of affordability and future security,” Njeri advises.
Similarly, individuals aged 38-47 years can invest in the same plan and gain a maturity estimate of Ksh1,662,338, following the same premium structure. Njeri highlights that this option facilitates steady financial accumulation with added benefits like accidental death coverage and last expense payouts. “These added features ensure that policyholders not only grow their wealth but also safeguard their families against unforeseen events,” she notes.
In Kenya, life insurance policies come with significant tax relief benefits. You are entitled to an insurance tax relief of up to 15% on the premiums paid. This incentive reduces your overall tax liability, making life insurance more cost-effective.
Life insurance policies, such as endowment or whole life plans, can serve as a retirement fund. They allow you to accumulate wealth over time, providing you the financial security you need in your retirement years.
Planning for a child’s education is another critical aspect of financial security. Some insurance companies have designed education policies to help cover education expenses, allowing you to safeguard your child's future and ensuring their studies remain uninterrupted.
According to an estimate shared by Njeri, a 10 year education plan for policyholders aged 28-37 is projected to yield a maturity value of Ksh1,435,299, based on a monthly premium of Ksh10,025. Similarly, individuals aged 38-47 years can access a comparable education plan with a maturity estimate of Ksh1,409,195, providing a practical solution for parents seeking guaranteed funds for their child’s education.
To purchase a life insurance policy in Kenya, you should;
Determine the type of policy you want based on your financial capabilities, future goals, and family situation.
Compare different policies available in the market to find one that best suits your needs. Evaluate the financial stability of the insurance company and their track record of making payouts. You may want to consult with an insurance agent for more advice.
Once you have selected the insurance company, fill out the application form. In some cases, you may be required to undergo a medical examination or provide medical disclosures. It is important to be truthful and accurate during this process.
Read Also: Would You Take an Insurance Cover to Protect Household Items?
The next step is making the first premium payment. You will then receive the policy document and policy number. The life insurance policy document will contain details of the contract, such as;
In the event of death, the beneficiary should notify the insurance company either via email or physically. The beneficiary will be expected to fill a claim form and be advised on the documents needed.
When the policy matures, the insurance company will notify you and guide you on how to collect your benefits. If you are not contacted, contact the insurance company to notify them.
Inquire from your insurer how long it takes to settle claims. Most insurance companies settle their claims within 7-10 business days.
Simply, life insurance is a smart financial tool that can give you peace of mind today and a secure future for your loved ones. Take your time, explore different policies and find one that works for you.
Your occupation, age and current health status.
Yes. However, the payment you receive will be lower than the premiums paid. The surrender value (the amount you are paid when you cancel the policy) is often less than the premium paid due to the costs incurred by the insurance company.
Yes, you can. However, certain conditions may apply depending on your insurer.
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