Insurance Premium Financing in Kenya

An insurance policy is a cover that one takes to cover for risks and uncertainties that come with life. For instance accidents, sickness, and fire amongst other risks that come with life. Since these incidents are prone to happen.It is important to have an insurance policy that covers and would compensate for the likelihood of them happening. Getting an insurance cover comes at a cost known as an insurance premium. This is the money paid to insurance companies that take up to cover the risks. The insurance premium is often paid upfront. This may stretch one pocket and as well may be expensive to finance one-off. To address this insurance premium financing, comes in handy to help one finance the premiums and get an active insurance cover.

In this article, we look at Insurance premium financing where in brief the following subtopics are discussed:

1. What is Insurance Premium Financing
2. Why get an IPF to finance insurance premium
3. How IPF works
4. Advantages of IPF
5. Who can get an IPF
6. Requirements for IPF
7. A case example of UAP Afyaimara IPF by Faulu Microfinance
8. Conclusion

What is Insurance Premium Financing

Insurance premium financing is an undertaking between three parties, where a third party often a financial institution undertakes to pay an insurance company insurance premium in full on behalf of a client who is seeking insurance coverage from an insurance company.

For instance, in the case of Medical Insurance, a person who is seeking health medical insurance coverage and does not have enough money to pay for the insurance premium to the insurance company approaches the IPF institution (3^rd Party) to pay premiums to the insurance company for the medical insurance to be undertaken (underwritten).

Why get an IPF to finance insurance premiums?

Insurance companies price the cost they charge clients based on different factors majorly being based on the nature of the risk they are expected to cover. This therefore means that the more the risk or severity of the risk occurring, the higher the insurance premium the insurance company will charge.

When the cost of getting Insurance is relatively higher, it may be a challenge for people to acquire the insurance even when they have the capability but they face a cashflow deficiency.

Insurance premium financing is therefore an option where one can get financing for the premium and is covered against risks as they pay the IPF financer over a flexible payment plan schedule.

How IPF Works

As highlighted earlier, IPF involves three parties. The client needs insurance, the insurance company covering the risk, and a financial institution offering to pay for the client. Insurance premium financing is a loan that is used to only pay for insurance premiums directly to the insurance company, the client does not get the money disbursed to him or her.

1. A client works with their insurance agent to identify the insurance coverage needs and then the agency obtains policy quotes from the insurance companies.
2. The agent then gives the policy details to a premium finance company, that is, the insurance company, premium amount, coverage type, policy term, and the desired payment schedule.
3. If the insured approves, the premium finance company provides a financing agreement that shows the total cost of the loan including interest and fees, the required down payment, repayment terms, and the repayment schedule.
4. Once the agreement is done, the premium finance company pays the full insurance premium to the insurance company on behalf of the client.
5. The client repays the premium finance company based on the agreed payment schedule until the loan is fully paid. These payments include the amount borrowed and the accrued interest.

Advantages of IPF

There are numerous advantages why one would opt to go for IPF when getting an insurance policy, these include;

1. One can get insurance and pay in instalments therefore managing their cash flow. One does not have to drain their savings to pay a one-off premium.
2. Most insurance companies will recommend financing institutions that process IPF faster even without requesting collateral.
3. The Interest charged by financing institutions is fair and the interest charged is not exorbitant
4. IPF enables one to access insurance coverage.

Who can go for an IPF

Anyone or institution that is getting insurance coverage can opt to get insurance premium financing.

• An Individual
• A partnership
• A Chama
• A company

Requirements for IPF

Depending on the person or entity getting the IPF, the following documents are required

• National Identification Card for Individuals
• KRA PIN Certificate
• Certificate of Incorporation 12, Company KRA PIN, and Directors ID for Limited Companies
• The cheque payment or deposit  for the first installment
• Duly filled IPF forms

A case example of IPF

UAP Old Mutual Medical Insurance Premium Financing

UAP Old Mutual is a leading top-tier insurance company offering both Life, General, and medical insurance. As an agency with an active account with the underwriter we asset our clients get IPF where they would opt to pay premiums in instalments.

UAP Oldmutula has medical insurance products packaged as Afyaimara which is their conventional medical insurance cover that has inpatient and outpatient benefits with riders to cover dental, optical, and other health conditions.

They also have Afya imara county medical product which is an affordable medical insurance product that has a panel of hospitals limited to a certain number of hospitals.

Where a client wants to pay in instalments, an arrangement is made through IPF where financing is made by Faulu Microfinance Bank. The full premium is paid to OldMutual by the micro finance and the medical cover takes effect. The client then pays monthly instalments to Faulu which include the principal amount and interest for the financing.

Get UAP OldMutual Medical Insurance today through Faulu IPF with a low interest rate and a flexible repayment period from 4 months up to 10 months.

Conclusion

Insurance premium financing is an undertaking a financial institution takes to pay insurance premiums in full to an insurance company on behalf of the client purchasing the insurance. It is a loan paid by the financial institution and the person getting the insurance Is given a flexible monthly repayment plan to pay in installments thereby accessing insurance coverage against the risk faced.

Insurance premium financing often charges fair interest rates and has flexible payment plans making the cost of accessing insurance cheap. Don’t shy away from getting insurance coverage today on the view upfront one-time payment of premiums is expensive since you can get a flexible payment plan through IPF.

As a leading agency offering customised insurance services , get in touch to get a flexible insurance policy with monthly instalments through IPF.