Life insurance is a long-term insurance policy offered by life insurance companies. Generally, insurance companies offer compensation on the occurrence of a risk they have covered, however, life insurance companies in Kenya only offer assurance. Life can not be compensated like in the case of death, insurance companies can not apply the principle of indemnity. Therefore insurace companies offer assurance to pay beneficiaries in a life insurance policy on the occurrence of an event like death, critical illness, permanent and temporary disability, or maturity of the term in a term-based policy.
As highlighted in our prior post, as much as human beings value their properties such as cars, and acquire for them a comprehensive insurance cover and Medical Insurance cover, it is also a priority to think and value themselves by taking a life insurance cover. What can life insurance cover? To answer this question, think about your life; what is dependent on your well-being? Your livelihood is all dependent on your well-being. This includes the ability to work to generate income that takes care of all financial needs. However, in the event of a life risk that could hamper this, you and your dependents are exposed to a big risk of lifestyle disruption.
An accident for instance may render one disabled to the extent of not working normally. On the other hand getting a critical illness such as kidney failure, cancer, etc could also disrupt the livelihood of an individual, and in the worst case of death, the dependents are left shaken by the passing on of their loved especially when they were the breadwinners.
This article looks at life insurance policies in Kenya as follows:
This is long-term insurance that pays out benefits on the maturity or occurrence of a defined incident in an insurance policy. An insurance policy is a binding document, a contract between an insurance company and the insured person defining the terms, duties, and obligations of both parties.
In life insurance, there are different Life Insurance Products discussed as follows:
This is the commonly known insurance policy under life insurance. It is an insurance policy that pays a defined amount of Sum Assured (Principles of Insurance) upon the death of the policyholder to the beneficiaries.
As insurance compensates on the occurrence of a risk happening – Indemnity Principle, for Life an insurance company can not compensate for the death of a person but only gives an Assurance of a specified amount.
Naturally and especially in the African setting, death is a very sensitive topic to discuss and people shy away from even thinking about it. However and sorry to say so, it is amongst the only two things that are certain in Life. “Death and Taxation”. Therefore, since death is certain it should not be a topic to shy away from especially when in good health.
Think about your life and the people who depend on you, your family, your children, and those you treasure. For your family and children, the impact you have over them and your goals is to see them succeed. On the flip side, think of what their life would be like in your absence.
As initially stated, it would be the wish of everyone to ensure that they live well and their lifestyle does not change.
With this in mind, a wise person or parent would take a Whole Life Insurance Policy that would pay his/her dependents some income in his/her absence. As the good book says in Proverbs 13:22 (NKJV): “A good man leaves an inheritance to his children’s children . . .” Whole life insurance can be a good tool to leave an inheritance to one’s children. With the policy, one is rest assured, that their children or beneficiaries will get paid money in the event of natural or accidental death.
Whole life insurance has been embraced by people in advanced economies as people use it to plan for their legacy and heritage, knowing their loved ones will not be in shambles upon their demise.
A gentleman X aged 35 years in his youthful and energetic working years where he has constant income takes a whole life insurance policy with a sum assured of Ksh 5 Million, a Critical Illness rider of 2.5 Million, and an accidental death rider of Ksh 1 Million, with Prudential. The premiums payable are as follows:
| Monthly | Quaterly | Semi-Annually | Anuaaly |
| Ksh 3,929 | Ksh 11,398 | Ksh 22,020 | Ksh 43,652 |
| Benefits Payable to Beneficiaries | |||
| Death Benefit . (Natural Death) | Criticall Illness (Upon discovery of a Critical Disease) | Accidental Death (Accidental Death) | |
| Ksh 5,000,000 100% of SA | Ksh 2,500,000 | Ksh 1,000,000 *Note: On Accidetal death , where the rider is Added, the beneficiries get the Rider Benefit ..Ksh 1M and the Sum Assured ..Ksh 5M Total: KSh 6M | |
In the above case scenario, Gentleman X has taken up, the most important decision to Assure his family of a brighter future. Even in his absence they are assured of Ksh 5M, in case he is discovered with a critical illness like Cancer, Stroke, Kidney failure, or paralysis and he is no longer productive, they have an Assured KSh 2.5M or in the event he dies in an accident, in addition to getting the Ksh 5M Sum Assured, the family gets Ksh 1M.
This is an insurance policy that combines both aspects of life insurance and savings. It is a temporary life insurance that has a defined period and premiums paid earn interest (savings aspect). This means with an Endowment policy, in case of death before the maturity period lapses the beneficiaries are paid the Sum Assured. At maturity, the life assured is paid the maturity benefits which include accrued interest and bonuses.
Endowment life insurance can be taken up to plan for life uncertainties for a defined period and the premiums paid earn interest. The products are packaged differently by different insurance companies. A popular one is an Education Insurance Policy.
This is an Endowment policy that has a sum-assured-life aspect- which is an amount guaranteed to one beneficiary in the event of either death, critical illness, or permanent and temporary disability. The policy also has an estimated maturity value at the expiry of the term period which is the amount paid plus interest and bonuses.
This is just a case example of what one can do with an endowment insurance policy. Others may include starting up a project in the future.
“Education is the key to success, an equalizer, and light to a society..” Among other phases, it portrays how education is important. As a parent or guardian, education is a priority as one gives all to ensure their children have the best education. However, getting a good education comes with higher school fees which have to be raised.
With an Endowment plan, you do not have to wait until your children have reached the school-going age, you can take up an education policy and start raising the money by paying either monthly, quarterly, semi-annually, or annual premiums to an insurance company. The money accumulates and also earns interest to compensate for inflation
Don’t try this, Insurance installs a saving discipline where you commit to paying premiums. On the saving aspect, there are high chances of not keeping the discipline.
On the other hand, which is very important, insurance gives you a sum assured that they pay in the event of demise, critical illness, or permanent disability therefore guaranteeing your children’s education.
Anybody can take up an education policy, this is not only for the young family that are at the stage of bringing up their kids. Even other population age groups can take up the policy. One can take up a policy to finance their high school, graduate, or post-graduate studies.
Remember insurance is there to provide assurance and compensation in the event of a risk happening. It would be prudent and wise to take up an education policy since you are not sure of what tomorrow holds. The economy has different cycles and with the impact of local and global economic shocks, the boom is not equally guaranteed.
Just as the business plans through budgeting and other mechanisms, you could prioritize taking up an education policy and even paying the premium annually or semi-annually when your business is booming. This means you will have a guaranteed Sum-Asusred of an amount to pay school fees for your beneficiaries. With this approach, you will not have to break your bank account to withdraw a lump sum of your savings.
An analogy with this saving approach is the Story of the King Dream interpretation by Joseph (Genesis 41:17-41) of the 7 Fat Cows that were Swallowed by the 7 Thin Cows. The dream was interpreted as 7 years of plenty that would be followed by 7 years of famine and the King had to put measures to ensure enough was saved to cover for the hard times. Similarly, as you have a stable income you should plan for the unforeseen coming years when shocks such as COVID-19 bring about economic shocks.
A Case Example of Education Policy
Your dependants are guaranteed of a Sum assured that will be paid to them upon the maturity of the policy.
With Life Insurance you can pass on your legacy to your dependents upon eternal retirement. Life policies have been embraced as an effective tool by the Western and Asian communities to pass on a legacy to their children and even grandchildren.
Endowment life insurance policies can be taken up as a means of accumulating funds to do a project later in life. The funds you will be paying as a premium on a monthly basis earn interest and this is better than saving in a bank account that does not earn interest but money loses value due to inflation. On the other hand, the life aspect guarantees the sum assured figure.
With life insurance, you have the peace of mind of knowing that in the event of life uncertainties your life and that of your dependents are taken care of.
Life insurance can be used as a means of financial protection or to pass on a legacy, it can also be used as an investment tool for unit-linked endowment plans such as an education policy. All in all, life insurance has the most important aspect of life assurance, it gives an assurance in the event of the insured event happening the beneficiaries are paid.
By understanding the importance of life insurance in Kenya, people embrace it as a financial planning tool and as well as a succession planning tool where they are safeguarded and provide their dependents a position to get income in their absence.
To inquire more or get a custom life insurance product, you can reach out to our team for a custom-tailored life insurance policy.
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