The life insurance penetration rate in Kenya is a worrying 1.3%
Many people consider life insurance a SCAM, a PRIVILIGE for the RICH or something that only OLD people should consider.
In this thread I answer the Most Frequently Asked Questions about Life Insurance
A Thread🧵
Many people consider life insurance a SCAM, a PRIVILIGE for the RICH or something that only OLD people should consider.
In this thread I answer the Most Frequently Asked Questions about Life Insurance
A Thread🧵
What is Life Insurance?
It is a contract between an insurance policy holder and an insurance company.
The insurer promises to pay a sum of money in exchange for a premium, upon the death of an insured persona or after a set period.
It is a contract between an insurance policy holder and an insurance company.
The insurer promises to pay a sum of money in exchange for a premium, upon the death of an insured persona or after a set period.
What are the different types of Life Insurance?
There are 3 main types:
1. Endowment plan.
This is the most common in Kenya
It combines both wealth creation and wealth protection.
It pays out either at maturity or upon death, whichever comes first.
It is also the most expensive cover.
I don't recommend endowment plans because their nature of combining wealth protection and wealth creation compromises both goals.
The sum assured that would be passed down to your dependents is a joke, and also the return on savings compared to other investments is also a joke.
However, it's good for people who struggle with a discipline of making voluntary savings as premiums payable to the endowment plan is compulsory and you also can't withdraw anytime you want.
There are 3 main types:
1. Endowment plan.
This is the most common in Kenya
It combines both wealth creation and wealth protection.
It pays out either at maturity or upon death, whichever comes first.
It is also the most expensive cover.
I don't recommend endowment plans because their nature of combining wealth protection and wealth creation compromises both goals.
The sum assured that would be passed down to your dependents is a joke, and also the return on savings compared to other investments is also a joke.
However, it's good for people who struggle with a discipline of making voluntary savings as premiums payable to the endowment plan is compulsory and you also can't withdraw anytime you want.
2. Term Life
This is the cheapest cover.
If offers purely death benefits if death occurs within the duration of the insurance period.
It is best taken for mortgage insurance or key man insurance.
Term life can also be combined with an investment product like a MMF to act as a plan to secure your kids' education.
This is the cheapest cover.
If offers purely death benefits if death occurs within the duration of the insurance period.
It is best taken for mortgage insurance or key man insurance.
Term life can also be combined with an investment product like a MMF to act as a plan to secure your kids' education.
3. Whole Life
This is a plan that pays death benefits to your beneficiaries, and also can come with additional riders that pay when the insured is diagnosed with a critical illness or experiences a personal accident.
You can opt to pay premiums for 10, 15, 20 years or for life.
This policy is best taken for protection, liquid inheritance and income replacement.
It is a mid cost cover that a highly recommend everyone to include their wealth protection baskets.
In this thread we shall mainly discuss the whole life cover.
This is a plan that pays death benefits to your beneficiaries, and also can come with additional riders that pay when the insured is diagnosed with a critical illness or experiences a personal accident.
You can opt to pay premiums for 10, 15, 20 years or for life.
This policy is best taken for protection, liquid inheritance and income replacement.
It is a mid cost cover that a highly recommend everyone to include their wealth protection baskets.
In this thread we shall mainly discuss the whole life cover.
Why is Life insurance important?
1. Income protection.
Life insurance payouts help replace income of a sole bread winner in a family.
In the events of death, critical illness or personal accident, your paycheck as the main or sole breadwinner is replaced by the life cover payouts.
1. Income protection.
Life insurance payouts help replace income of a sole bread winner in a family.
In the events of death, critical illness or personal accident, your paycheck as the main or sole breadwinner is replaced by the life cover payouts.
2. Wealth preservation
Insurance payouts are tax free. Hence this aids in a tax free wealth transfer from one generation to the other.
Life polices cannot be contested. You don't go through probate courts when one dies.
Insurance payouts are tax free. Hence this aids in a tax free wealth transfer from one generation to the other.
Life polices cannot be contested. You don't go through probate courts when one dies.
3. Enhance your Estate planning
Life insurance can be used for estate planning by making the family trust fund the beneficiary of the life cover.
Life insurance policies inject liquidity in the trust funds as they are mostly paid within 2 weeks.
This ensures that the family isn't stressed or desperate to liquidate any investments prematurely in the case of death or incapacitation.
Life insurance can be used for estate planning by making the family trust fund the beneficiary of the life cover.
Life insurance policies inject liquidity in the trust funds as they are mostly paid within 2 weeks.
This ensures that the family isn't stressed or desperate to liquidate any investments prematurely in the case of death or incapacitation.
4. Ensures continuity in the family unit.
It allows family members to focus on healing because money isn't a big challenge.
It allows family members to focus on healing because money isn't a big challenge.
Can a young person benefit from life insurance?
A whole life policy has both living and death benefits.
When critical riders like a critical illness cover or a personal accident rider are added, it becomes equally important to anyone regardless of age.
Moreover life insurance is cheaper with age. That means you can secure a good protection cover with low premiums at a young age.
But if you wait until you get older, it will be more expensive for you to get the same cover meaning you will pay way higher premiums.
A whole life policy has both living and death benefits.
When critical riders like a critical illness cover or a personal accident rider are added, it becomes equally important to anyone regardless of age.
Moreover life insurance is cheaper with age. That means you can secure a good protection cover with low premiums at a young age.
But if you wait until you get older, it will be more expensive for you to get the same cover meaning you will pay way higher premiums.
Do life insurance companies always deny claims
Insurance companies aim to provide coverage for valid claims based on the terms and conditions outlined in the policy.
An insurance policy is a contract of utmost good faith meaning the insured should disclose all required information truthfully.
However, there are some insurance companies with very poor claim settlement ratios as you can check in the IRA website.
It would be best to work with a company with a good track record for settling claims.
Insurance companies aim to provide coverage for valid claims based on the terms and conditions outlined in the policy.
An insurance policy is a contract of utmost good faith meaning the insured should disclose all required information truthfully.
However, there are some insurance companies with very poor claim settlement ratios as you can check in the IRA website.
It would be best to work with a company with a good track record for settling claims.
How does a sample use case of a whole life cover look like?
Here's an example of how a life insurance policy can help in wealth protection.
A 35yr old lady can leave an inheritance of KES 20M through a whole life cover as illustrated below.
Life cover: 20M
Critical illness cover: 10M
Accidental disability cover: 10M
Payment term: 20 years
Premium: KES 15,880 per month
Here's an example of how a life insurance policy can help in wealth protection.
A 35yr old lady can leave an inheritance of KES 20M through a whole life cover as illustrated below.
Life cover: 20M
Critical illness cover: 10M
Accidental disability cover: 10M
Payment term: 20 years
Premium: KES 15,880 per month
If she survives the whole term of 20 years,
MONEY IN = 15,880*12*20 = 3.739,200
MONEY OUT = 20M + 8M in bonusses = 28M to the family whenever she dies
If she dies before the 20years are over, the family receives the 20M plus bonuses accumulated to the time of death.
This amount is assured as death is guaranteed.
MONEY IN = 15,880*12*20 = 3.739,200
MONEY OUT = 20M + 8M in bonusses = 28M to the family whenever she dies
If she dies before the 20years are over, the family receives the 20M plus bonuses accumulated to the time of death.
This amount is assured as death is guaranteed.
Do note that the example above is used for illustration purposes only.
Premiums are affected by the following factors:
- Age
- Gender
- Smoking status
-Medical history
- Policy duration
If you would like a customized whole life policy quotation to see how your premiums and life cover would look like, you can fill in this form and I will send it yo you via email
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Premiums are affected by the following factors:
- Age
- Gender
- Smoking status
-Medical history
- Policy duration
If you would like a customized whole life policy quotation to see how your premiums and life cover would look like, you can fill in this form and I will send it yo you via email
forms.gle
What factors should you consider when looking for an insurance cover?
1. What type of insurance do you need? This is determined by the reason why you need life insurance in the first place.
2. What amount of money can you comfortably afford to pay in premiums
3. Understand the basic insurance language. Things like: Premiums, sum assured, cash value, riders, death benefit,
1. What type of insurance do you need? This is determined by the reason why you need life insurance in the first place.
2. What amount of money can you comfortably afford to pay in premiums
3. Understand the basic insurance language. Things like: Premiums, sum assured, cash value, riders, death benefit,
4. Determine the protection you need.
This can be done by using the 10X rule. The sum assured on your cover should be 10X your annual income.
5. Know your insurer. A life insurance policy is only as valuable as the company behind it.
Consider an insurance company with a good track record of paying premiums.
These analysis can be found on the IRA website
This can be done by using the 10X rule. The sum assured on your cover should be 10X your annual income.
5. Know your insurer. A life insurance policy is only as valuable as the company behind it.
Consider an insurance company with a good track record of paying premiums.
These analysis can be found on the IRA website
Thanks for reading until this far.
If you would like help in getting a good life cover from a reliable company to help build your wealth protection portfolio,
You can fill in this questionnaire and I will personally get back to you with sample quotations and more feedback
forms.gle
If you would like help in getting a good life cover from a reliable company to help build your wealth protection portfolio,
You can fill in this questionnaire and I will personally get back to you with sample quotations and more feedback
forms.gle
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